In a standard portfolio choice between a risky and a safe asset, we study the effect of imposing premia and penalties conditional on the realized return of the portfolio meeting a given threshold. We show that thresholds set at ”intermediate levels” have the effect to increase the optimal share of the safe asset, while very low and very high thresholds may induce larger shares of the risky investment if a condition on the curvature of the utility function holds.
On the Effect of Premia and Penalties on Optimal Portfolio Choice / S., Currarini; Marini, Marco. - In: INTERNATIONAL JOURNAL OF CONTEMPORARY MATHEMATICAL SCIENCES. - ISSN 1312-7586. - STAMPA. - 7:(2012), pp. 2341-2344.
On the Effect of Premia and Penalties on Optimal Portfolio Choice
MARINI, MARCO
2012
Abstract
In a standard portfolio choice between a risky and a safe asset, we study the effect of imposing premia and penalties conditional on the realized return of the portfolio meeting a given threshold. We show that thresholds set at ”intermediate levels” have the effect to increase the optimal share of the safe asset, while very low and very high thresholds may induce larger shares of the risky investment if a condition on the curvature of the utility function holds.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
