webcab.lib.finance.portfolio
Class AboveException

java.lang.Object
  |
  +--java.lang.Throwable
        |
        +--java.lang.Exception
              |
              +--java.lang.RuntimeException
                    |
                    +--webcab.lib.finance.portfolio.PortfolioException
                          |
                          +--webcab.lib.finance.portfolio.AboveException

All Implemented Interfaces:

Serializable

public class AboveException

extends PortfolioException

The `AboveException' exception is thrown when the investors utility function does not select an optimal portfolio from the Efficient Frontier because for all values of the expected return considered the Utility function is greater than the Efficient Frontier.

If the `AboveException' was thrown then though no optimal portfolio was selected in accordance with the investors utility function, the investor is prepared to hold any of the available portfolios because for any given value of the expected return he is prepared to accept a higher level of risk that is actually necessary.

In the case when the AboveException is thrown the follow two modifications of the problem are equally justified:

1. Change Utility Function: Either shift the investors utility function down along the risk axis or along the expected return axis by re-setting the utility function private fields using one of Markowitz.setUtilityFunctionInterp(double[], double[]) or Markowitz.setUtilityFunctionPoly(double[]). Once the investors utility function has been reset this methods can be re-applied.
2. Returns Portfolio: Return the portfolio of the Efficient Frontier which has the maximum expected return with the range considered. The rationale being that since the investor is prepared to hold any of the portfolios over the range of the expected returns for which it is considered. The assumption of the Markwotz model would lead us to believe that the investor would wish to maximise his expected return and select the portfolio with the highest expected return.

See Also:

Serialized Form

Constructor Summary

AboveException()

Methods inherited from class java.lang.Throwable

fillInStackTrace, getCause, getLocalizedMessage, getMessage, getStackTrace, initCause, printStackTrace, printStackTrace, printStackTrace, setStackTrace, toString

Methods inherited from class java.lang.Object

clone, equals, finalize, getClass, hashCode, notify, notifyAll, wait, wait, wait

Constructor Detail

AboveException

public AboveException()