Robust one-period option hedging

Operations Research

Volumn 54, Issue 6, 2006, Pages 1051-1062

  Lutgens, Frank ^a   Sturm, Jos ^b   Kolen, Antoon ^a  

^a MAASTRICHT UNIVERSITY   (Netherlands)

^b TILBURG UNIVERSITY   (Netherlands)

Author keywords

Hedging; Nonnegative cones; Portfolio optimization; Robust optimization

Indexed keywords

INDUSTRIAL ECONOMICS; OPERATIONS RESEARCH; OPTIMIZATION;

HEDGING PROBLEMS; PORTFOLIO OPTIMIZATION; ROBUST OPTIMIZATION;

FINANCIAL DATA PROCESSING;

EID: 33847078453     PISSN: 0030364X     EISSN: 15265463     Source Type: Journal    
DOI: 10.1287/opre.1060.0352     Document Type: Article

References (30)

1. Aït-Sahalia, Y., M. Brandt. 2001. Variable selection for portfolio choice. J. Finance 56(4) 1297-1351.
2. Anderson, E., L. Hansen, T. Sargent. 1999. Robustness, detection, and the price of risk. Working paper, Stanford University, Stanford, CA.
3. Barberis, N. 2000. Investing for the long run when returns are predictable. J. Finance 55(1) 225-264.
4. Ben-Tal, A., A. Nemirovski. 1997. Robust truss topology design via semidefinite programming. SIAM J. Optim. 7(4) 991-1016.
5. Ben-Tal, A., A. Nemirovski. 1998. Robust convex optimization. Math. Oper. Res. 23(4) 769-805.
6. Ben-Tal, A., A. Nemirovski. 2001. Lectums on Modern Convex Optimisation: Analysis Methods and Engineering Applications. SIAM-MPS, Philadelphia, PA.
7. Black, F., R. Litterman. 1990. Asset allocation: Combining investor views with market equilibrium. Technical report, Goldman, Sachs & Co., Fixed Income Research.
8. Black, F., R. Litterman. 1992. Global portfolio optimization. Financial Analysts J. 48(9) 28-43.
9. Black, F., M. Scholes. 1973. The pricing of options and corporate liabilities. J. Political Econom. 81 637-654.
10. Cremers, M. 2002. Stock return predictability: A Bayesian model selection perspective. Rev. Financial Stud. 15(4) 1223-1249.
11. El Ghaoui, L., H. Oustry, H. Lebret. 1998. Robust solutions to uncertain semidefinite programs. SIAM J. Optim. 9(1) 33-52.
12. Gilboa, I., D. Schmeidler. 1989. Maxmin expected utility with non-unique prior. J. Math. Econom. 18(2) 141-153.
13. Goldfarb, D., G. Iyengar. 2003. Robust portfolio selection problems. Math. Oper. Res. 28(1) 1-38.
14. Horst, J., F. Roon, B. Werker. 2002. Incorporating estimation risk in portfolio choice. Working paper, CentER, Tilburg University, Tilburg, The Netherlands.
15. Jagannathan, R., T. Ma. 2003. Risk reduction in large portfolios - Why imposing wrong constraints helps. J. Finance 58(4) 1651-1684.
16. Jobson, J., B. Korkie. 1981. Putting Markowitz theory to work. J. Portfolio Management 7(4) 70-74.
17. Jorion, P. 1986. Bayes-Stein estimation for portfolio analysis. J. Financial Quant. Anal 21(3) 279-292.
18. Kandel, S., R. Stambaugh. 1996. On the predictability of stock returns: An asset-allocation perspective. J. Finance 51 385-424.
19. Lutgens, F. 2004. Robust portfolio optimization. Ph.D. thesis, Maastricht University, Maastricht, The Netherlands.
20. Maenhout, P., 1999. Robust portfolio rules and asset pricing. Ph.D. thesis, Harvard University, Cambridge, MA.
21. Markowitz, H. 1952. Portfolio selection. J. Finance 7(1) 77-91.
22. Michaud, R. 1989. The Markowitz optimization enigma: Is "optimized" optimal? Financial Analysts J. 45(1) 31-42.
23. Michaud, R. 1998. Efficient Asset Management: A Practical Guide to Stock Portfolio Optimization and Asset Allocation. Harvard Business School Press, Boston, MA.
24. Pàstor, L. 2000. Portfolio selection and asset pricing models. J. Finance 55(1) 179-223.
25. Pàstor, L., F. Stambaugh. 2000. Comparing asset pricing models: An investment perspective. J. Financial Econom. 56(3) 335-381.
26. Rustem, B., R. Becker, W. Marty. 2000. Robust min-max portfolio strategies for rival forecast and risk scenarios. J. Econom. Dynam. Control 24 1591-1621.
27. Sturm, J. 1999. Using SeDuMi 1.02, a MATLAB toolbox for optimization over symmetric cones. Optim. Methods Software 11-12 625-653.
28. Sturm, J., S. Zhang. 2003. On cones of nonnegative quadratic functions. Math. Oper. Res. 28(2) 246-267.
29. Uppal, R., T. Wang. 2003. Model misspecification and underdiversification. J. Finance 58(6) 2465-2486.
30. Zenios, S. 1993. Financial Optimization. Cambridge University Press, Cambridge, UK.