Dr. Jan-Frederik Mai
The author’s article “Mai (2020): Portfolio optimization for credit-risky assets under Marshall-Olkin dependence” solves portfolio selection for credit-risky assets under Marshall–Olkin dependence based on the concept of power/logarithmic utility maximization. Unfortunately, this article contains three crucial mistakes. First, an analogy with Markowitz was presented in a didactic manner that was unfortunate, caused by a confusion of regular and stochastic exponential. Second, a leverage constraint was mis-specified, which resulted in an error in situations with short-selling allowed. Third, there was a numerical error in an analysis that pointed out how higher-order dependence properties beyond first and second moments can have a significant impact on optimal portfolios. Luckily, all three mistakes can be corrected without altering the essential contributions and statements of the original article, which is the content of the present correction note.
Static pricing-hedging duality for credit default swaps and the negative basis arbitrage
Portfolio selection based on graphs: does Mr. Markowitz have his finger in the pie?