Please use this identifier to cite or link to this item:
https://doi.org/10.21256/zhaw-29377
Publication type: | Article in scientific journal |
Type of review: | Peer review (publication) |
Title: | Hedging goals |
Authors: | Krabichler, Thomas Wunsch, Marcus |
et. al: | No |
DOI: | 10.1007/s11408-023-00437-y 10.21256/zhaw-29377 |
Published in: | Financial Markets and Portfolio Management |
Volume(Issue): | 38 |
Issue: | 1 |
Page(s): | 93 |
Pages to: | 122 |
Issue Date: | 17-Nov-2023 |
Publisher / Ed. Institution: | Springer |
ISSN: | 1934-4554 2373-8529 |
Language: | English |
Subjects: | Goal-based investing; Quantile hedging; Efficient hedging; Deep hedging |
Subject (DDC): | 332.6: Investment |
Abstract: | Goal-based investing is concerned with reaching a monetary investment goal by a given finite deadline, which differs from mean-variance optimization in modern portfolio theory. In this article, we expand the close connection between goalbased investing and option hedging that was originally discovered in Browne (Adv Appl Probab 31(2):551–577, 1999) by allowing for varying degrees of investor risk aversion using lower partial moments of different orders. Moreover, we show that maximizing the probability of reaching the goal (quantile hedging, cf. Föllmer and Leukert in Finance Stoch 3:251–273, 1999) and minimizing the expected shortfall (efficient hedging, cf. Föllmer and Leukert in Finance Stoch 4:117–146, 2000) yield, in fact, the same optimal investment policy. We furthermore present an innovative and model-free approach to goal-based investing using methods of reinforcement learning. To the best of our knowledge, we offer the first algorithmic approach to goal-based investing that can find optimal solutions in the presence of transaction costs. |
Further description: | Erworben im Rahmen der Schweizer Nationallizenzen (http://www.nationallizenzen.ch) |
URI: | https://digitalcollection.zhaw.ch/handle/11475/29377 |
Fulltext version: | Published version |
License (according to publishing contract): | CC BY 4.0: Attribution 4.0 International |
Departement: | School of Management and Law |
Organisational Unit: | Institute of Wealth & Asset Management (IWA) |
Appears in collections: | Publikationen School of Management and Law |
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2023_Krabichler-Wunsch_Hedging-goals.pdf | 2.6 MB | Adobe PDF | View/Open |
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Krabichler, T., & Wunsch, M. (2023). Hedging goals. Financial Markets and Portfolio Management, 38(1), 93–122. https://doi.org/10.1007/s11408-023-00437-y
Krabichler, T. and Wunsch, M. (2023) ‘Hedging goals’, Financial Markets and Portfolio Management, 38(1), pp. 93–122. Available at: https://doi.org/10.1007/s11408-023-00437-y.
T. Krabichler and M. Wunsch, “Hedging goals,” Financial Markets and Portfolio Management, vol. 38, no. 1, pp. 93–122, Nov. 2023, doi: 10.1007/s11408-023-00437-y.
KRABICHLER, Thomas und Marcus WUNSCH, 2023. Hedging goals. Financial Markets and Portfolio Management. 17 November 2023. Bd. 38, Nr. 1, S. 93–122. DOI 10.1007/s11408-023-00437-y
Krabichler, Thomas, and Marcus Wunsch. 2023. “Hedging Goals.” Financial Markets and Portfolio Management 38 (1): 93–122. https://doi.org/10.1007/s11408-023-00437-y.
Krabichler, Thomas, and Marcus Wunsch. “Hedging Goals.” Financial Markets and Portfolio Management, vol. 38, no. 1, Nov. 2023, pp. 93–122, https://doi.org/10.1007/s11408-023-00437-y.
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