# Questions tagged [portfolio-theory]

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### How do I use the Malliavin calculus to solve for the optimal trading strategy in the classic Merton problem?

How do I use the Malliavin calculus to solve for the optimal trading strategy in the classic Merton problem? In Duffie's book "Dynamic Asset Pricing," he outlines the "Martingale method" of solving ...
357 views

### Optimal consumption in Merton-like portfolio choice model with constant wage

My Questions Consider the following problem. It is almost identical to the classic Merton portfolio choice problem. Here I'm solving it using the so-called Martingale method. I have provided my ...
378 views

### Why stochastic dominance is “stochastic”?

I think the CDF is pretty much fixed, so the FOSD (first order stochastic dominance) is pretty much non-stochastic. Why does it have a "stochastic" in its name?
52 views

### given someone's past investing history, is there a way to calculate his risk aversion?

given someone's past investing history, is there a way to calculate his risk aversion? Say, we know this client's investment history for example his past return, is there a way to calculate his risk ...
100 views

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### Mean Variance Optimization in a Utility Maximization Framework

I'm struggling to gain a broad understanding of Mean-Variance utility theory as it relates to finding the efficient frontier of a group of assets which each have some return and variance. The typical ...
202 views

### Fundamental Theorem of Asset Pricing (Linear Algebra)

I saw this question in a textbook that I was recently reading and don't really know how to aprpoach this problem. Let $H$ be a finite dimensional vector space with inner product ($\cdotp$, $\cdotp$)....
73 views

### Quadratic utility: monotonicity and risk aversion

I am taking macro class this fall. One of the problems asks whether decreasing absolute risk-aversion and ever-increasing consumption are two unattractive implications of the quadractic utility ...
511 views

### Utility theory and portfolio optimization: utility of what exactly?

In finance, a common problem is selection of an optimal portfolio given some constraints (e.g. budget constraint and perhaps nonnegative allocation constraint). One can define the optimization problem ...
205 views