Dynamic investment portfolio optimization using a multivariate Merton model with correlated jump risk

Document Type : Research Paper

Authors

1 Department of Statistics, Faculty of Mathematics and Computer, Shahid Bahonar University of Kerman, Kerman, Iran

2 Department of Biostatistics & Data Science, School of Public Health, The University of Texas Health Science Center at Houston (UTHealth), Houston, Texas

3 Department of Biostatistics & Data Science, School of Public Health, The University of Texas Health Science Center at Houston (UTHealth), Houston, Texas

10.22075/ijnaa.2021.23421.2538

Abstract

‎In this paper‎, ‎we are concerned with the optimization of a dynamic investment portfolio when the securities which follow a multivariate Merton model with dependent jumps are periodically invested and proceed by approximating the Condition-Value-at-Risk (CVaR) by comonotonic bounds and maximize the expected terminal wealth‎. ‎Numerical studies‎, ‎as well as applications of our results to real datasets‎, ‎are also provided‎.

Keywords