2011/02/24 by Yang Li, Li, Yang, Traian A. Pirvu +1
Decision Sciences · Economics, Econometrics and Finance · #Economic theories and models #FOS: Economics and business #FOS: Mathematics #Optimization and Control (math.OC) #Portfolio Management (q-fin.PM) #Risk and Portfolio Optimization #Stochastic processes and financial applications
paper · pdf · doi:10.48550/arxiv.1102.5078
openalex publication_date 2011/02/24 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
This paper considers the mean variance portfolio management problem. We examine portfolios which contain both primary and derivative securities. The challenge in this context is due to portfolio's nonlinearities. The delta-gamma approximation is employed to overcome it. Thus, the optimization problem is reduced to a well posed quadratic program. The methodology developed in this paper can be also applied to pricing and hedging in incomplete markets.