Advanced Strategies of Portfolio Management in the Heston Market Model

TL;DR

This paper analyzes asset diversity and cash inclusion in portfolio management within the Heston market model, proposing two new strategies based on MACD and RSI, supported by Monte Carlo simulations.

Contribution

It introduces two novel portfolio management strategies utilizing MACD and RSI indicators within the Heston model framework.

Findings

Enhanced portfolio performance with new strategies

Impact of asset diversity and cash inclusion analyzed

Simulation results demonstrate strategy effectiveness

Abstract

There is a great number of factors to take into account when building and managing an investment portfolio. It is widely believed that a proper set-up of the portfolio combined with a good, robust management strategy is the key to successful investment. In this paper, we aim at an analysis of two aspects that may have an impact on investment performance: diversity of assets and inclusion of cash in the portfolio. We also propose two new management strategies based on the MACD and RSI factors known from technical analysis. Monte Carlo simulations within the Heston model of a market are used to perform numerical experiments.