The Role of Options in Goals-Based Wealth Management

29 Pages Posted: 21 Oct 2020 Last revised: 6 Jul 2021

See all articles by Sanjiv Ranjan Das

Sanjiv Ranjan Das

Santa Clara University - Leavey School of Business

Greg Ross

Independent Researcher

Date Written: September 12, 2020

Abstract

We develop a facile methodology using dynamic programming for goals-based wealth management over long horizons where rebalancing uses the standard securities and also derivative securities. A kernel density estimation approach is developed to accommodate any number of derivative assets, solving a high dimensional problem with fast computation. The approach easily accommodates skewed and fat-tailed distributions. Portfolio performance is much better with the use of options, especially for investors with aggressive goals.

Keywords: Options, goal-based investing, dynamic programming

JEL Classification: G11, G13

Suggested Citation

Das, Sanjiv Ranjan and Ross, Greg, The Role of Options in Goals-Based Wealth Management (September 12, 2020). Available at SSRN: https://ssrn.com/abstract=3691699 or http://dx.doi.org/10.2139/ssrn.3691699

Sanjiv Ranjan Das (Contact Author)

Santa Clara University - Leavey School of Business ( email )

Department of Finance
316M Lucas Hall
Santa Clara, CA 95053
United States

HOME PAGE: http://srdas.github.io/

Greg Ross

Independent Researcher

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