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| Author: | Branger, N. Breuer, B. Schlag, C. |
| Title: | Discrete-time implementation of continuous-time portfolio strategies |
| Journal: | European Journal of Finance
2010 : JAN/FEB, VOL. 16:1-2, p. 137-152 |
| Index terms: | portfolio selection strategy assets allocation trading derivative securities models |
| Language: | eng |
| Abstract: | This paper analyzes the discretization error in a simulation study for a plenty of models. It is found that time discreteness can be neglected when only the stock and the money market account are traded, even in models with stochastic volatility and jumps. On the other hand, when derivatives (hereafter as: dervs.) are traded the utility loss because of discrete trading can be much larger than the utility gain from having access to dervs. To benefit from dervs., the the investor needs to rebalance his portfolio at least daily. |
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