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Continuous-time (Ross-type) portfolio separation, (almost) without Itô calculus.
- Source :
- Stochastics: An International Journal of Probability & Stochastic Processes; Jan2017, Vol. 89 Issue 1, p38-64, 27p
- Publication Year :
- 2017
-
Abstract
- This paper shows how the distributions-based portfolio separation theorem – also known as the mutual fund theorem – for elliptical and stable distributions carries over from a static to a continuous-time model. Without invoking Itô stochastic calculus, only the definition of the Itô integral, we generalize and simplify an approach of Khanna and Kulldorff (http://link.springer.com/article/10.1007%2Fs007800050056Finance Stoch. 3 (1999), pp. 167–185). In addition to (re-) covering the classical cases, this paper also gives separation results for non-symmetric stable distributions underno shorting-conditions, including a new case ofone fundseparation without risk-free opportunity. Applicability of the skewed cases to insurance and banking is discussed, as well as limitations. [ABSTRACT FROM PUBLISHER]
Details
- Language :
- English
- ISSN :
- 17442508
- Volume :
- 89
- Issue :
- 1
- Database :
- Complementary Index
- Journal :
- Stochastics: An International Journal of Probability & Stochastic Processes
- Publication Type :
- Academic Journal
- Accession number :
- 119571875
- Full Text :
- https://doi.org/10.1080/17442508.2015.1132218