Mean-Expectile Portfolio Selection
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Date
2021
Authors
Lin, Hongcan
Saunders, David
Weng, Chengguo
Journal Title
Journal ISSN
Volume Title
Publisher
Springer
Abstract
We consider a mean-expectile portfolio selection problem in a continuous-time diffusion model. We exploit the close relationship between expectiles and the Omega performance measure to reformulate the problem as the maximization of the Omega measure, and show the equivalence between the two problems. After showing that the solution for the mean-expectile problem is not attainable but that the value function is finite, we modify the problem by introducing a bound on terminal wealth and obtain the solution by Lagrangian duality. The global expectile minimizing portfolio and efficient frontier with a terminal wealth bound are also discussed.
Description
This is a post-peer-review, pre-copyedit version of an article published in Applied Mathematics & Optimization. The final authenticated version is available online at: https://doi.org/10.1007/s00245-019-09601-1.
Keywords
expectiles, portfolio selection, efficient frontier, performance measures, Omega