THE NUMÉRAIRE PROPERTY AND LONG-TERM GROWTH OPTIMALITY FOR DRAWDOWN-CONSTRAINED INVESTMENTS

Kardaras, C; Obłój, J; Platen, E

THE NUMÉRAIRE PROPERTY AND LONG-TERM GROWTH OPTIMALITY FOR DRAWDOWN-CONSTRAINED INVESTMENTS

Kardaras, C Obłój, J Platen, E

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Publication Type:: Journal Article
Citation:: Mathematical Finance, 2017, 27 (1), pp. 68 - 95
Issue Date:: 2017-01-01

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Field	Value	Language
dc.contributor.author	Kardaras, C	en_US
dc.contributor.author	Obłój, J	en_US
dc.contributor.author	Platen, E https://orcid.org/0000-0003-4595-3123	en_US
dc.date.issued	2017-01-01	en_US
dc.identifier.citation	Mathematical Finance, 2017, 27 (1), pp. 68 - 95	en_US
dc.identifier.issn	0960-1627	en_US
dc.identifier.uri	http://hdl.handle.net/10453/36414
dc.description.abstract	© 2014 Wiley Periodicals, Inc. We consider the portfolio choice problem for a long-run investor in a general continuous semimartingale model. We combine the decision criterion of pathwise growth optimality with a flexible specification of attitude toward risk, encoded by a linear drawdown constraint imposed on admissible wealth processes. We define the constrained numéraire property through the notion of expected relative return and prove that drawdown-constrained numéraire portfolio exists and is unique, but may depend on the investment horizon. However, when sampled at the times of its maximum and asymptotically as the time-horizon becomes distant, the drawdown-constrained numéraire portfolio is given explicitly through a model-independent transformation of the unconstrained numéraire portfolio. The asymptotically growth-optimal strategy is obtained as limit of numéraire strategies on finite horizons.	en_US
dc.relation.ispartof	Mathematical Finance	en_US
dc.relation.isbasedon	10.1111/mafi.12081	en_US
dc.subject.classification	Finance	en_US
dc.title	THE NUMÉRAIRE PROPERTY AND LONG-TERM GROWTH OPTIMALITY FOR DRAWDOWN-CONSTRAINED INVESTMENTS	en_US
dc.type	Journal Article
utslib.citation.volume	1	en_US
utslib.citation.volume	27	en_US
utslib.for	0102 Applied Mathematics	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Science
pubs.organisational-group	/University of Technology Sydney/Faculty of Science/School of Mathematical and Physical Sciences
pubs.organisational-group	/University of Technology Sydney/Strength - QFRC - Quantitative Finance Research Centre
utslib.copyright.status	open_access
pubs.issue	1	en_US
pubs.publication-status	Published	en_US
pubs.volume	27	en_US

Abstract:

© 2014 Wiley Periodicals, Inc. We consider the portfolio choice problem for a long-run investor in a general continuous semimartingale model. We combine the decision criterion of pathwise growth optimality with a flexible specification of attitude toward risk, encoded by a linear drawdown constraint imposed on admissible wealth processes. We define the constrained numéraire property through the notion of expected relative return and prove that drawdown-constrained numéraire portfolio exists and is unique, but may depend on the investment horizon. However, when sampled at the times of its maximum and asymptotically as the time-horizon becomes distant, the drawdown-constrained numéraire portfolio is given explicitly through a model-independent transformation of the unconstrained numéraire portfolio. The asymptotically growth-optimal strategy is obtained as limit of numéraire strategies on finite horizons.

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http://hdl.handle.net/10453/36414