anno_Ch1_Handout随机金融建模.pdf

Chapter 1 Mean-Variance Analysis For a given set of k( 2) different assets, how to spread the available investment funds over this set of assets? Assets usually involve both riskless and risky ones. ? Riskless assets: bank accounts; bonds. ? Risky assets: shares (stocks); · · · . Assumption: decisions on the distribution of the funds are made at time 0, the beginning of the period, after observing the prices of the given assets; their consequences will be observed at time 1, the end of the period, and there is no further action in between. Notation: Label k( 2) given (risky) assets: 1, · · · , k; write Sij (j = 0, 1): the price at time j for the asset i. ? The prices Si0 at time 0 have been observed, and so are treated as known constants. ? The prices Si1 at time 1 are not foreseeable, and so are modelled as non- negative random variables. Write ? Ri = Si1 Si0 : the rate of return (or simply the return) on asset i; R = (R1, · · · , Rk); ? ri = E[Ri]: the means of the returns; r = (r1, · · · , rk) = E[R]; ? vij = cov(Ri, Rj) = E[(Ri ? ri) (Rj ? rj)]: variances and covariances of the returns; V = (vij). Note that R, r and V are all determined by the market, i.e. cannot be changed by each individual investor. 1-1 §1.1. Portfolio An investor’s choice of the way to spread her funds over this set of assets constitutes her portfolio. There are many different, but equivalent, ways to represent portfolios. Example 1.1. Initial wealth = w. Use number of units purchased in each asset (share): (x1, · · · , xk), where xi is the number of units in asset i. Hence x1S10 + · · ·+ xkSk0 = w = intial cost of the portfolio (x1, · · · , xk). Use capital spent to purchase each asset: (y1, · · · , yk), where yi is the capital spent on asset i. Hence, yi = xiSi0 and y1 + · · · , yk = w. Use proportion of capital spent to purchase each asset: (ξ1, · · · , ξk), where ξi is the proposition of capital spent on asset i. Hence, ξi = yi/w and ξ1 + · · ·+ ξk = 1. In this chapter, if all assets are