Risk Limited Asset Allocation with a Budget Threshold Utility Function and Leptokurtotic Distributions of Returns
Risk Limited Asset Allocation with a Budget Threshold Utility Function and Leptokurtotic Distributions of Returns ArXiv ID: 2512.11666 “View on arXiv” Authors: Graham L Giller Abstract An analytical solution to single-horizon asset allocation for an investor with a piecewise-linear utility function, called herein the “budget threshold utility,” and exogenous position limits is presented. The resulting functional form has a surprisingly simple structure and can be readily interpreted as representing the addition of a simple “risk cost” to otherwise frictionless trading. ...