2014/11/24 by Pourbabaee, Farzad, Kwak, Minsuk, Pirvu, Traian A.
#FOS: Economics and business #FOS: Mathematics #Optimization and Control (math.OC) #Portfolio Management (q-fin.PM)
paper · doi:10.48550/arxiv.1411.6657
We consider the problem of minimizing capital at risk in the Black-Scholes setting. The portfolio problem is studied given the possibility that a correlation constraint between the portfolio and a financial index is imposed. The optimal portfolio is obtained in closed form. The effects of the correlation constraint are explored; it turns out that this portfolio constraint leads to a more diversified portfolio.