Optimal investment to minimize the probability of drawdown

DOI10.1080/17442508.2016.1155590MaRDI QIDQ2833710zbMATH OpenOpenAlexFDO

Authors Bahman Angoshtari, Erhan Bayraktar, Virginia R. Young

Publication date 25 November 2016

Published in Stochastics (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1506.00166

zbMATH Keywords

stochastic optimal controloptimal investmentprobability of drawdown

Mathematics Subject Classification ID

Portfolio theory (91G10) Optimal stochastic control (93E20)

Abstract: We determine the optimal investment strategy in a Black-Scholes financial market to minimize the so-called {it probability of drawdown}, namely, the probability that the value of an investment portfolio reaches some fixed proportion of its maximum value to date. We assume that the portfolio is subject to a payout that is a deterministic function of its value, as might be the case for an endowment fund paying at a specified rate, for example, at a constant rate or at a rate that is proportional to the fund's value.

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Cited in

(18)

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• Maximizing the goal-reaching probability before drawdown with borrowing constraint
• Optimal discounted drawdowns in a diffusion approximation under proportional reinsurance
• Maximizing a robust goal-reaching probability with penalization on ambiguity
• Optimal proportional reinsurance to minimize the probability of drawdown under thinning-dependence structure
• Optimal investment and reinsurance to maximize the probability of drawup before drawdown
• Minimizing the probability of lifetime drawdown under constant consumption
• Optimal investment and reinsurance to minimize the probability of drawdown with borrowing costs
• On minimizing drawdown risks of lifetime investments
• Optimal per-loss reinsurance and investment to minimize the probability of drawdown
• Optimal investment strategy to minimize occupation time
• Optimal Investment Strategy for Risky Assets
• Robust optimal investment and reinsurance to minimize a goal-reaching probability with constrained control variables
• Minimizing the penalized probability of drawdown for a general insurance company under ambiguity aversion

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