News-generated dependence and optimal portfolios for n stocks in a market of Barndor ¤-Nielsen and Shephard type

@inproceedings{Lindberg2004NewsgeneratedDA,
  title={News-generated dependence and optimal portfolios for n stocks in a market of Barndor ¤-Nielsen and Shephard type},
  author={Carl Lindberg},
  year={2004}
}
We consider Merton’s portfolio optimization problem in a Black and Scholes market with non-Gaussian stochastic volatility of Ornstein-Uhlenbeck type. The investor can trade in n stocks and a risk-free bond. We assume that the dependence between stocks lies in that they partly share the Ornstein-Uhlenbeck processes of the volatility. We refer to these as news processes, and interpret this as that dependence between stocks lies solely in their reactions to the same news. We show that this… CONTINUE READING