Title
A cumulative prospect view on portfolios that hold structured products A cumulative prospect view on portfolios that hold structured products
Author
Faculty/Department
Faculty of Applied Economics
Publication type
article
Publication
,
Subject
Economics
Source (journal)
The journal of behavioral finance. - Place of publication unknown
Volume/pages
16(2015) :4 , p. 297-310
ISSN
1542-7560
ISI
000366387100002
Carrier
E
Target language
English (eng)
Full text (Publishers DOI)
Affiliation
University of Antwerp
Abstract
Many investors hold structured products in their portfolio. The current paper develops a break-even analysis on how this presence of structured products can be understood based on cumulative prospect theory. The framework provides additional insights into the behavioral conditions and required return expectations that make investors buy into expensive structured products with uncertain rewards. We make the strong assumption that the structured product has a zero prospect value when considered as a stand-alone investment. Still the optimized portfolio typically includes structured products. The degree of probability distortion determines the entry of structured products in the optimal portfolio. Once included it is the curvature of the value function that guides the actual weight of structured products and the potential increase in portfolio prospect value. Structured products receive a higher weight and increase the portfolio prospect value more if the investor is less conservative.
E-info
http://gateway.webofknowledge.com/gateway/Gateway.cgi?GWVersion=2&SrcApp=PARTNER_APP&SrcAuth=LinksAMR&KeyUT=WOS:000366387100002&DestLinkType=RelatedRecords&DestApp=ALL_WOS&UsrCustomerID=ef845e08c439e550330acc77c7d2d848
http://gateway.webofknowledge.com/gateway/Gateway.cgi?GWVersion=2&SrcApp=PARTNER_APP&SrcAuth=LinksAMR&KeyUT=WOS:000366387100002&DestLinkType=FullRecord&DestApp=ALL_WOS&UsrCustomerID=ef845e08c439e550330acc77c7d2d848
https://repository.uantwerpen.be/docman/iruaauth/cb5cde/130295.pdf
Handle