TY - JOUR
T1 - Portfolio insurance with liquidity risk
AU - Matsumoto, Koichi
N1 - Funding Information:
Acknowledgements The author wishes to thank an anonymous referee and Prof. Jiro Akahori for assistance in revising the paper. This research was partially supported by the Ministry of Education, Science, Sports and Culture, Grant-in-Aid for Young Scientists (B), 19740051.
PY - 2007/12
Y1 - 2007/12
N2 - This paper studies a portfolio insurance problem with liquidity risk. We consider an investor who wants to maximize the expected growth rate of wealth in a low liquid market. The investor can trade assets only at random times and his wealth must not fall below a predetermined floor. We find the optimal expected growth rate and an optimal strategy. The optimal strategy is closely related with a traditional constant proportion portfolio insurance strategy. Also we show that the same strategy maximizes the growth rate almost surely. Further we study the floor effect on the growth rate.
AB - This paper studies a portfolio insurance problem with liquidity risk. We consider an investor who wants to maximize the expected growth rate of wealth in a low liquid market. The investor can trade assets only at random times and his wealth must not fall below a predetermined floor. We find the optimal expected growth rate and an optimal strategy. The optimal strategy is closely related with a traditional constant proportion portfolio insurance strategy. Also we show that the same strategy maximizes the growth rate almost surely. Further we study the floor effect on the growth rate.
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U2 - 10.1007/s10690-008-9067-z
DO - 10.1007/s10690-008-9067-z
M3 - Article
AN - SCOPUS:69249207978
SN - 1387-2834
VL - 14
SP - 363
EP - 386
JO - Asia-Pacific Financial Markets
JF - Asia-Pacific Financial Markets
IS - 4
ER -