European Actuarial Journal

, Volume 9, Issue 2, pp 559–574 | Cite as

On asset allocation for a threshold model with dependent returns

  • Ebrahim Amini-Seresht
  • Yiying ZhangEmail author
  • Xiaohu Li
Original Research Paper


Consider a risk-averse investor allocating a certain amount of capital w to n dependent risky assets, where the i-th asset will default if its stochastic return \(X_i\) is less than some predetermined threshold level \(l_i\ge 0\), for \(i=1,\ldots,n\), and the investor wants to maximize the expected utility of the aggregate stochastic returns. In this paper, for assets with stochastic returns being left tail weakly stochastic arrangement increasing (LWSAI), the optimal and the worst allocation policies are derived as \((0,\ldots,0,w)\) and \((w,0,\ldots,0)\), respectively. Some numerical examples are also provided to illustrate the theoretical findings. These new results complement the corresponding ones in Cheung and Yang (Insur Math Econ 35:595–609, 2004) and Cai and Wei (J Multivar Anal 138:156–169, 2015), and partially answer the Open Problem 2 proposed in Li and Li (Quant Financ Econ 2(1):190–216, 2018).


Asset allocation Threshold model LWSAI Increasing concave order Risk-averse 



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Copyright information

© EAJ Association 2019

Authors and Affiliations

  1. 1.Department of StatisticsBu-Ali Sina UniversityHamedanIran
  2. 2.School of Statistics and Data Science, LPMC and KLMDASR, Nankai UniversityTianjinChina
  3. 3.Department of Mathematical SciencesStevens Institute of TechnologyHobokenUSA

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