Jumps call for a completely new portfolio theory: We have to integrate jump risks explicitly into portfolio planning via correction terms. Therefore, it is clearly a second-best solution either to ignore jumps as rare events or to simply adjust stocks' mean and standard deviation and to continue to apply the optimization formulas of the pure diffusion case.
CITATION STYLE
Nietert, B. (2000). How to Integrate Stock Price Jumps into Portfolio Selection (pp. 347–354). https://doi.org/10.1007/978-3-642-57280-7_38
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