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Equity-Linked Notes Portfolio Optimization

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Optimization and Applications (OPTIMA 2019)

Part of the book series: Communications in Computer and Information Science ((CCIS,volume 1145))

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Abstract

This paper considers pricing equity-linked notes (ELN) portfolio and related portfolio optimization. ELNs are the derivative instruments which can be viewed as bonds with floating coupons. The floating coupon is represented in terms of an embedded option that depends on the behavior of a certain underlying asset or a basket of them. We provide the new optimization problem by hyperbolic absolute risk aversion (HARA) utility function approach. We obtain the solution of this problem in terms of a dynamic programming equation.

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Author information

Authors and Affiliations

  1. Plekhanov Russian University of Economics, Moscow, Russia

    Lev Petrov & Yulia Polozhishnikova

Authors
  1. Lev Petrov
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  2. Yulia Polozhishnikova
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Corresponding author

Correspondence to Lev Petrov .

Editor information

Editors and Affiliations

  1. University of Montenegro, Podgorica, Montenegro

    Milojica Jaćimović

  2. Krasovskii Institute of Mathematics and Mechanics, Yekaterinburg, Russia

    Michael Khachay

  3. FRC CSC RAS, Moscow, Russia

    Vlasta Malkova

  4. FRC CSC RAS, Moscow, Russia

    Mikhail Posypkin

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Petrov, L., Polozhishnikova, Y. (2020). Equity-Linked Notes Portfolio Optimization. In: Jaćimović, M., Khachay, M., Malkova, V., Posypkin, M. (eds) Optimization and Applications. OPTIMA 2019. Communications in Computer and Information Science, vol 1145. Springer, Cham. https://doi.org/10.1007/978-3-030-38603-0_8

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  • DOI: https://doi.org/10.1007/978-3-030-38603-0_8

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  • Publisher Name: Springer, Cham

  • Print ISBN: 978-3-030-38602-3

  • Online ISBN: 978-3-030-38603-0

  • eBook Packages: Computer ScienceComputer Science (R0)

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