THE CONTINUOUS-TIME OPTIMAL PORTFOLIO USING A MULTIVARIATE NORMAL INVERSE GAUSSIAN MODEL

Xing Yu, Guohua Chen

Department of Mathematics & Applied Mathematics Hunan university of humanities, science and technology, Loudi, 417000, P.R. China

This paper develops the continuous-time portfolio model using a multivariate normal inverse Gaussian model. Though the weighted average of lognormal variables is no longer lognormal, it can be approximated by other distributions, such as a multivariate normal inverse Gaussian model. Our method belongs to the analytic approximation class. By comparing to Monte Carlo experiments, it illustrates the computational efficiency and accuracy of our approach.