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Title: Portfolio strategies with optimal investment to derivatives Authors:  Tomas Tichy - VSB-TU Ostrava (Czech Republic) [presenting]
Abstract: Portfolio selection strategies with options are proposed. We generally assume that the returns follow Markov processes that are approximated with proper Markov Chains. Then, we preliminary examine all the American options with underlying the components of the Dow Jones Industrial index and we discuss different portfolio strategies based either on hedging the risk of the underlying, or on optimizing proper expected first passage times of the wealth at some benchmark levels. We focus on an empirical comparison among different hedging and timing portfolio selection strategies. Specifically, we compare the ex post wealth obtained by optimizing new performance strategies based either on hedging of the portfolio risk properly or optimizing the average first passage time of the wealth at some benchmark levels.