Optimal Dynamic Futures Portfolios Under a Multiscale Central Tendency Ornstein-Uhlenbeck Model
We study the problem of dynamically trading multiple futures whose underlying asset price follows a multiscale central tendency Ornstein-Uhlenbeck (MCTOU) model. Under this model, we derive the closed-form no-arbitrage prices for the futures contracts. Applying a utility maximization approach, we solve for the optimal trading strategies under different portfolio configurations by examining the associated system of Hamilton-Jacobi-Bellman (HJB) equations. The optimal strategies depend on not only the parameters of the underlying asset price process but also the risk premia embedded in the futures prices. Numerical examples are provided to illustrate the investor's optimal positions and optimal wealth over time.
PDF AbstractTasks
Datasets
Add Datasets
introduced or used in this paper
Results from the Paper
Submit
results from this paper
to get state-of-the-art GitHub badges and help the
community compare results to other papers.
Methods
No methods listed for this paper. Add
relevant methods here
