Optimal portfolios of a long-term investor with floor or drawdown constraints

Vladimir Cherny; Jan Obloj

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arXiv · 1305.6831

Optimal portfolios of a long-term investor with floor or drawdown constraints

Vladimir Cherny·Jan Obloj

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Abstract

We study the portfolio selection problem of a long-run investor who is maximising the asymptotic growth rate of her expected utility. We show that, somewhat surprisingly, it is essentially not affected by introduction of a floor constraint which requires the wealth process to dominate a given benchmark at all times. We further study the notion of long-run optimality of wealth processes via convergence of finite horizon value functions to the asymptotic optimal value. We characterise long-run optimality under floor and drawdown constraints.

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BibTeX RIS

Vladimir Cherny, Jan Obloj. 2013-05-29. Optimal portfolios of a long-term investor with floor or drawdown constraints. https://arxiv.org/abs/1305.6831

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