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Portfolio selection under VaR constraints

Author

Listed:
  • Kostas Giannopoulos
  • Ephraim Clark
  • Radu Tunaru

Abstract

In this paper we show that by assuming a constant variance/covariance matrix over the holding period, the VaR limits can often be exceeded within the relevant horizon period. To minimize this risk, we formulate the problem in terms of portfolio selection and propose an innovative methodology using conditional VaR that minimizes the VaR at each point of the holding period. We rewrite the optimisation problem by taking into consideration the variability of risk on all assets eligible to be included in the portfolio. Copyright Springer-Verlag Berlin/Heidelberg 2005

Suggested Citation

  • Kostas Giannopoulos & Ephraim Clark & Radu Tunaru, 2005. "Portfolio selection under VaR constraints," Computational Management Science, Springer, vol. 2(2), pages 123-138, March.
    • Handle: RePEc:spr:comgts:v:2:y:2005:i:2:p:123-138
    DOI: 10.1007/s10287-004-0030-9
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    Citations

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    Cited by:

    1. Meryem Masmoudi & Fouad Ben Abdelaziz, 2018. "Portfolio selection problem: a review of deterministic and stochastic multiple objective programming models," Annals of Operations Research, Springer, vol. 267(1), pages 335-352, August.
    2. Bauwens, Luc & Ben Omrane, Walid & Rengifo, Erick, 2010. "Intradaily dynamic portfolio selection," Computational Statistics & Data Analysis, Elsevier, vol. 54(11), pages 2400-2418, November.
    3. Tianyu Hao, 2012. "Optimal portfolio model based on WVAR," Papers 1211.5628, arXiv.org.

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