Semimartingale Theory of Monotone Mean-Variance Portfolio Allocation

Mathematical Finance, Forthcoming

10 Pages Posted: 9 Apr 2019 Last revised: 29 Sep 2019

See all articles by Aleš Černý

Aleš Černý

Cass Business School, City, University of London

Date Written: January 6, 2019

Abstract

We study dynamic optimal portfolio allocation for monotone mean-variance preferences in a general semimartingale model. Armed with new results in this area we revisit the work of Cui, Li, Wang and Zhu (2012, MAFI) and fully characterize the circumstances under which one can set aside a non-negative cash flow while simultaneously improving the mean-variance efficiency of the left-over wealth. The paper analyzes, for the first time, the monotone hull of the Sharpe ratio and highlights its relevance to the problem at hand.

Keywords: monotone mean–variance, monotone Sharpe ratio, free cash-flow stream

JEL Classification: G11, C61

Suggested Citation

Černý, Aleš, Semimartingale Theory of Monotone Mean-Variance Portfolio Allocation (January 6, 2019). Mathematical Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3353703 or http://dx.doi.org/10.2139/ssrn.3353703

Aleš Černý (Contact Author)

Cass Business School, City, University of London ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

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