9,723 research outputs found
Static and dynamic VaR constrained portfolios with application to delegated portfolio management
Cataloged from PDF version of article.We give a closed-form solution to the single-period portfolio selection problem with a Value-at-Risk (VaR) constraint in the presence of a set of risky assets with multivariate normally distributed returns and the risk-less account, without short sales restrictions. The result allows to obtain a very simple, myopic dynamic portfolio policy in the multiple period version of the problem. We also consider mean-variance portfolios under a probabilistic chance (VaR) constraint and give an explicit solution. We use this solution to calculate explicitly the bonus of a portfolio manager to include a VaR constraint in his/her portfolio optimization, which we refer to as the price of a VaR constraint. © 2013 © 2013 Taylor & Francis
Portfolio Optimization and Model Predictive Control: A Kinetic Approach
In this paper, we introduce a large system of interacting financial agents in
which each agent is faced with the decision of how to allocate his capital
between a risky stock or a risk-less bond. The investment decision of
investors, derived through an optimization, drives the stock price. The model
has been inspired by the econophysical Levy-Levy-Solomon model (Economics
Letters, 45). The goal of this work is to gain insights into the stock price
and wealth distribution. We especially want to discover the causes for the
appearance of power-laws in financial data. We follow a kinetic approach
similar to (D. Maldarella, L. Pareschi, Physica A, 391) and derive the mean
field limit of our microscopic agent dynamics. The novelty in our approach is
that the financial agents apply model predictive control (MPC) to approximate
and solve the optimization of their utility function. Interestingly, the MPC
approach gives a mathematical connection between the two opponent economic
concepts of modeling financial agents to be rational or boundedly rational.
Furthermore, this is to our knowledge the first kinetic portfolio model which
considers a wealth and stock price distribution simultaneously. Due to our
kinetic approach, we can study the wealth and price distribution on a
mesoscopic level. The wealth distribution is characterized by a lognormal law.
For the stock price distribution, we can either observe a lognormal behavior in
the case of long-term investors or a power-law in the case of high-frequency
trader. Furthermore, the stock return data exhibits a fat-tail, which is a well
known characteristic of real financial data
Dynamic analysis of bankruptcy and economic waves
The procedures presented in this paper provide a dynamic apparatus of crediting the industrial operating systems with the assignment to avoid their correlated defaulting, to conserve general safety and soundness and improve its ability to serve as a source for sustainable growth for economy. The quality of operating firms at different periods is evaluated using the migration matrixes between some classes of default risk.credit risk ; economic growth ; regulation
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