Buy and Hold Golden Strategies in Financial Markets with Frictions and Depth Constraints

This paper deals with coherent risk measures and golden strategies, that is, financial portfolios (or financial strategies) with a negative risk and a non positive price. Golden strategies are important because they enable us to outperform every portfolio in a return/risk approach. In fact, every portfolio of securities is beaten by adding the golden strategy, i.e., the portfolio plus the golden strategy is better than the portfolio alone. Computationally tractable algorithms will be presented, and the general framework will be very realistic. Indeed, the study will incorporate all the classical frictions provoked by the order book of a financial market, and it will be both buy-and-hold and model-free. Numerical experiments involving derivative markets will be analysed.

coherent risk; market depth and frictions; golden strategy; computational tractability

Buy and Hold Golden Strategies in Financial Markets with Frictions and Depth Constraints Articles