Skip to main content
SpringerLink
Log in

Portfolio Selection Theory with Different Interest Rates for Borrowing and Leading

  • Published:
Journal of Global Optimization Aims and scope Submit manuscript

Abstract

This paper considers the portfolio selection problem with different interest rates for borrowing and leading. The portfolio frontier is described under the general condition that the riskless borrowing rate is higher than the riskless lending rate.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  1. Black F. and Scholes M. (1973) The pricing of options and corporate liabilities. Journal of Political Economics 81, 637–659.

    Google Scholar 

  2. Chamberlain G. (1983) A characterization of the distributions that imply mean-variance utility functions. Journal of Economic Theory 29, 185–201.

    Google Scholar 

  3. Cvitanic J. and Karatzas I. (1992) Convex duality in constrained portfolio optimization. The Annals Applied Probability 2, 767–818.

    Google Scholar 

  4. Cvitanic J. and Karatzas I. (1993) Hedging contingent claims with constrained portfolios. The Annals Applied Probability 3, 652–681.

    Google Scholar 

  5. Karoui El. and Quenez M.-C. (1995) Dynamic programming and pricing of contingent claims in an incomplete market. SIAM Journal on Control and Optimization 33, 29–66.

    Google Scholar 

  6. Epstein L. (1985) Decreasing risk aversion and mean-variance analysis. Econometrica 53, 945–962.

    Google Scholar 

  7. Gonzalez-Gaverra N. (1973) Inflation and capital asset market prices: theory and tests. Unpublished Ph.D. dissertation, Stanford University.

  8. Huang C-F. and Litzenberger R.H. (1988) Foundations for financial economics. Princeton University, California, Academic Press.

    Google Scholar 

  9. Markowitz H. (1952) Portfolio selection. Journal of Finance 7, 77–91.

    Google Scholar 

  10. Merton R.C. (1972) An analytical derivation of the efficient portfolio frontier. Journal of Financial and Quantitative Analysis 7, 1851–1872.

    Google Scholar 

  11. Merton R.C. (1973) Theory of rational option pricing. Bell Journal of Economics and Management Science 4, 141–183.

    Google Scholar 

  12. Merton R.C. (1990) Continuous-Time Finance. Blackwell Publishers, Cambridge, MA.

    Google Scholar 

  13. Munk C. (1997) No-arbitrage bounds on contingent claims prices with convex constraints on the dollar investments of the hedge portfolio. Working paper, Odense University.

  14. Roll R. (1977) A critique of the asset pricing theory's tests. Journal of Financial Economics 4, 129–176.

    Google Scholar 

  15. Rothschild M. and Stiglitz J. (1970) Increasing risk: I. A definition. Journal of Economic Theory 2, 225–243.

    Google Scholar 

  16. Rothschild M. and Stiglitz J. (1972) Addendum to ‘Increasing risk: I. A definition’. Journal of Economic Theory 3, 66–84.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Economics, The University of Western Ontario, London, Ontario, Canada, N6A 5C2; E-mail

    Shunming Zhang

  2. School of Economics and Management, Tsinghua University, Beijing, 100084, P.R. China; E-mail

    Shunming Zhang

  3. Institute of Systems Science, The Chinese Academy of Sciences, Beijing, 100080, P.R. China; E-mail

    Shouyang Wang

  4. Department of Computer Science, City University of Hong Kong Kowloon, Hong Kong SAR, China; E-mail

    Xiaotie Deng

Authors
  1. Shunming Zhang
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Shouyang Wang
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Xiaotie Deng
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints and permissions

About this article

Cite this article

Zhang, S., Wang, S. & Deng, X. Portfolio Selection Theory with Different Interest Rates for Borrowing and Leading. Journal of Global Optimization 28, 67–95 (2004). https://doi.org/10.1023/B:JOGO.0000006719.64826.55

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1023/B:JOGO.0000006719.64826.55

Search

Navigation