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The premium of dynamic trading

Abstract:

It is well established that, in a market with inclusion of a risk-free asset, the single-period mean-variance efficient frontier is a straight line tangent to the risky region, a fact that is the very foundation of the classical CAPM. In this paper, it is shown that, in a continuous-time market where the risky prices are described by Itô processes and the investment opportunity set is deterministic (albeit time-varying), any efficient portfolio must involve allocation to the risk-free asset a...

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Publisher copy:
10.1080/14697681003685589

Authors


Journal:
Quantitative Finance
Volume:
11
Issue:
1
Pages:
115-123
Publication date:
2011-01-01
DOI:
EISSN:
1469-7696
ISSN:
1469-7688
Source identifiers:
149579
Language:
English
Keywords:
Pubs id:
pubs:149579
UUID:
uuid:5087d02c-d23c-4850-894a-f739effdedef
Local pid:
pubs:149579
Deposit date:
2013-11-16

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