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arXiv · 2512.11666

Risk Limited Asset Allocation with a Budget Threshold Utility Function and Leptokurtotic Distributions of Returns

Graham L Giller
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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.

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Graham L Giller. 2025-12-16. Risk Limited Asset Allocation with a Budget Threshold Utility Function and Leptokurtotic Distributions of Returns. https://arxiv.org/abs/2512.11666

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