The Grossman and Zhou investment strategy is not always optimal

Summary, in English

Grossman and Zhou [1993. Optimal investment strategies for controlling drawdowns. Math. Finance 3, 241-276] proposed a strategy to maximize the asymptotic long-run growth rate of one's fortune F, subject to its never falling below lambda sup(0 <= t'<= t) F(t')e(r(t-t')), where 0 <=lambda <= 1 is a fixed constant chosen by the investor and r is a fixed, known, non-negative, continuously compounded interest rate on invested capital. In this paper we show that the strategy proposed in Grossman and Zhou does not retain its optimal long-run growth property when generalized to the discrete-time setting.

• Författare: M J Klass; Krzysztof Nowicki
• Avdelning/ar: Statistiska institutionen
• Publiceringsår: 2005
• Språk: Engelska
• Sidor: 245-252
• Publikation/Tidskrift/Serie: Statistics and Probability Letters
• Volym: 74
• Issue: 3
• Länkar: http://dx.doi.org/10.1016/j.spl.2005.04.060
• Dokumenttyp: Artikel i tidskrift
• Förlag: Elsevier
• Ämne: Probability Theory and Statistics
• Nyckelord: optimal asset allocation; drawdown; portfolio insurance
• Status: Published
• ISBN/ISSN/Övrigt: ISSN: 0167-7152