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Relative Robust Portfolio Optimization

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  • Raphael Hauser
  • Vijay Krishnamurthy
  • Reha Tutuncu

Abstract

Considering mean-variance portfolio problems with uncertain model parameters, we contrast the classical absolute robust optimization approach with the relative robust approach based on a maximum regret function. Although the latter problems are NP-hard in general, we show that tractable inner and outer approximations exist in several cases that are of central interest in asset management.

Suggested Citation

  • Raphael Hauser & Vijay Krishnamurthy & Reha Tutuncu, 2013. "Relative Robust Portfolio Optimization," Papers 1305.0144, arXiv.org, revised May 2013.
    • Handle: RePEc:arx:papers:1305.0144
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    References listed on IDEAS

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    Cited by:

    1. Sandra Caçador & Joana Matos Dias & Pedro Godinho, 2020. "Global minimum variance portfolios under uncertainty: a robust optimization approach," Journal of Global Optimization, Springer, vol. 76(2), pages 267-293, February.
    2. Alireza Ghahtarani & Ahmed Saif & Alireza Ghasemi, 2021. "Robust Portfolio Selection Problems: A Comprehensive Review," Papers 2103.13806, arXiv.org, revised Jan 2022.
    3. Sandra Cruz Caçador & Pedro Manuel Cortesão Godinho & Joana Maria Pina Cabral Matos Dias, 2022. "A minimax regret portfolio model based on the investor’s utility loss," Operational Research, Springer, vol. 22(1), pages 449-484, March.
    4. Groetzner, Patrick & Werner, Ralf, 2022. "Multiobjective optimization under uncertainty: A multiobjective robust (relative) regret approach," European Journal of Operational Research, Elsevier, vol. 296(1), pages 101-115.
    5. Gonc{c}alo Sim~oes & Mark McDonald & Stacy Williams & Daniel Fenn & Raphael Hauser, 2017. "Robust Portfolio Optimisation with Specified Competitors," Papers 1701.02958, arXiv.org.
    6. Dmitry B. Rokhlin, 2021. "Relative utility bounds for empirically optimal portfolios," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 93(3), pages 437-462, June.
    7. Alireza Ghahtarani & Ahmed Saif & Alireza Ghasemi, 2022. "Robust portfolio selection problems: a comprehensive review," Operational Research, Springer, vol. 22(4), pages 3203-3264, September.

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