Dynamic Portfolio Selection with Relative Value at Risk Constraint

Author

Wang, Xiuguo

Author_Institution

Sch. of Appl. Math., Central Univ. of Finance & Econ., Beijing

fYear

2008

fDate

12-14 Oct. 2008

Firstpage

1

Lastpage

4

Abstract

A portfolio optimization with downside risk based on benchmark is investigated. The expected relative terminal wealth is maximized under a new risk constraint, RVaR, which is defined by a relative wealth process. In a Black-Scholes setting, stochastic analysis method and nonlinear programming theory are used to obtain explicit solutions of the optimal strategies, which include the riskless asset, revised market portfolio and benchmark portfolio. The results exhibit three-fund separation theorem. Numerical examples are presented.

Keywords

investment; optimisation; risk management; stochastic processes; Black-Scholes setting; RVaR; dynamic portfolio selection; nonlinear programming; portfolio optimization; relative value-at-risk constraint; relative wealth process; stochastic analysis method; Asset management; Constraint optimization; Finance; Financial management; Investments; Mathematics; Portfolios; Risk analysis; Stochastic processes; Utility theory;

fLanguage

English

Publisher

ieee

Conference_Titel

Wireless Communications, Networking and Mobile Computing, 2008. WiCOM '08. 4th International Conference on

Conference_Location

Dalian

Print_ISBN

978-1-4244-2107-7

Electronic_ISBN

978-1-4244-2108-4

Type

conf

DOI

10.1109/WiCom.2008.2288

Filename

4680477