Back-testing the performance of an actively managed option portfolio at the Swedish Stock Market, 1990–1999
2003 (English)In: Journal of Economic Dynamics and Control, ISSN 0165-1889, Vol. 27, no 6, 1099-1112 p.Article in journal (Refereed) Published
We build an investment model based on Stochastic Programming. In the model we buy at the ask price and sell at the bid price. We apply the model to a case where we can invest in a Swedish stock index, call options on the index and the risk-free asset. By reoptimizing the portfolio on a daily basis over a ten-year period, it is shown that options can be used to create a portfolio that outperforms the index. With ex post analysis, it is furthermore shown that we can create a portfolio that dominates the index in terms of mean and variance, i.e. at given level of risk we could have achieved a higher return using options.
Place, publisher, year, edition, pages
Amsterdam, Netherlands: Elsevier, 2003. Vol. 27, no 6, 1099-1112 p.
Portfolio optimization; Derivatives
IdentifiersURN: urn:nbn:se:liu:diva-22326DOI: 10.1016/S0165-1889(02)00056-8ISI: 000180646100009Local ID: 1526OAI: oai:DiVA.org:liu-22326DiVA: diva2:242639