The optimal portfolios based on a modified safety-first rule with risk-free saving
The optimal portfolios based on a modified safety-first rule with risk-free saving
How to manage the social security trust funds is a topic of wide interests both academically and professionally. In the setting of portfolio selection with social security funds investment, we propose a modified safety-first (MSF) rule with portfolio selection including risk-free saving. We first demonstrate under some mild assumptions that the solution to the MSF model for an individual investor can be expressed by explicitly analytical formula and the necessary and sufficient conditions for their existence are obtained. We then derive the safety-first efficient frontiers in both the space of expected return and insured return level and the space of standard deviation and expected return, with numerical examples illustrated. By comparing the results of the MSF model with those of the mean-variance (M-V) model, some novel insights into the differences between them are further gained.
optimal portfolio, MSF model, social security fund, security return, safety-first efficient, risk-free saving
83-102
Ding, Yuanyao
a7bd2319-16e3-4653-809e-affab6b82f58
Lu, Zudi
4aa7d988-ac2b-4150-a586-ca92b8adda95
January 2016
Ding, Yuanyao
a7bd2319-16e3-4653-809e-affab6b82f58
Lu, Zudi
4aa7d988-ac2b-4150-a586-ca92b8adda95
Ding, Yuanyao and Lu, Zudi
(2016)
The optimal portfolios based on a modified safety-first rule with risk-free saving.
Journal of Industrial and Management Optimization, 12 (1), .
(doi:10.3934/jimo.2016.12.83).
Abstract
How to manage the social security trust funds is a topic of wide interests both academically and professionally. In the setting of portfolio selection with social security funds investment, we propose a modified safety-first (MSF) rule with portfolio selection including risk-free saving. We first demonstrate under some mild assumptions that the solution to the MSF model for an individual investor can be expressed by explicitly analytical formula and the necessary and sufficient conditions for their existence are obtained. We then derive the safety-first efficient frontiers in both the space of expected return and insured return level and the space of standard deviation and expected return, with numerical examples illustrated. By comparing the results of the MSF model with those of the mean-variance (M-V) model, some novel insights into the differences between them are further gained.
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e-pub ahead of print date: 2015
Published date: January 2016
Keywords:
optimal portfolio, MSF model, social security fund, security return, safety-first efficient, risk-free saving
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Statistics
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Local EPrints ID: 381485
URI: http://eprints.soton.ac.uk/id/eprint/381485
ISSN: 1547-5816
PURE UUID: 0e0904cc-f103-4ccc-bbd2-9f002ccf0a7d
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Date deposited: 08 Oct 2015 10:34
Last modified: 15 Mar 2024 03:49
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Yuanyao Ding
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