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Decision-making of portfolio investment with linear plus double exponential utility function∗∗∗

Published online by Cambridge University Press:  09 October 2013

Qingjian Zhou ,
Jia Jiao ,
Datian Niu  and
Deli Yang
Qingjian Zhou
Affiliation:
Institute of Systems Engineering, Dalian University of Technology, Dalian 116024, P.R. China. [email protected]; [email protected] College of Science, Dalian Nationalities University, Dalian 116600, P.R. China; [email protected]; [email protected]
Jia Jiao
Affiliation:
College of Science, Dalian Nationalities University, Dalian 116600, P.R. China; [email protected]; [email protected]
Datian Niu
Affiliation:
College of Science, Dalian Nationalities University, Dalian 116600, P.R. China; [email protected]; [email protected]
Deli Yang
Affiliation:
Institute of Systems Engineering, Dalian University of Technology, Dalian 116024, P.R. China. [email protected]; [email protected]
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Abstract

This paper broadens the exponential utility function commonly used by risk-averse investors to the linear plus double exponential utility function, which is applicable in most cases. Thus it is of essential and supreme significance to conduct a research on its optimal investment portfolio in securities investment. This paper, by means of the non-difference curve method, carries out a research into the optimal portfolio decision-making by investors who have this type of utility function. The optimal decision-making and the ratio of optimal portfolio investment are derived. Finally, an actual case is given to verify the relevant results.

Keywords

Linear plus double exponential utility functionoptimal portfolioinvestment decision-makingnon-difference curve method
Type
Research Article
Information
RAIRO - Operations Research , Volume 47 , Issue 4 , September 2013 , pp. 361 - 370
Copyright
© EDP Sciences, ROADEF, SMAI, 2013

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