Abstract

Systemic risk breeds default risk. I investigate the optimal portfolio implications of their joint presence for non-myopic investors in arbitrage-free markets when such risks take the form of asset value discontinuities. I contribute to the multiple-asset jump-diffusion portfolio analysis of Das and Uppal (J Financ 59:2809–2834, 2004) by introducing default risk and its investment-horizon effects on optimal portfolios (the optimal investment rules in Das and Uppal (J Financ 59:2809–2834, 2004) are time-invariant) and by linking excess expected returns to risk exposures.
Lingua originaleEnglish
Titolo della pubblicazione ospiteHandbook of Recent Advances in Commodity and Financial Modeling. International Series in Operations Research & Management Science, vol 257.
EditorG Consigli, S Stefani, G Zambruno
Pagine241-250
Numero di pagine10
Volume257
DOI
Stato di pubblicazionePubblicato - 2018

Serie di pubblicazioni

NomeINTERNATIONAL SERIES IN OPERATIONS RESEARCH & MANAGEMENT SCIENCE

Keywords

  • Arbitrage-free markets
  • Default risk
  • Investment opportunity set
  • Investment-horizon effects
  • Jump-diffusive processes
  • Risk premia
  • Strategic asset allocation
  • Systemic risk

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