Template-Type: ReDIF-Paper 1.0
Author-Name: Kaynar, B.
Author-Name-Last: Kaynar
Author-Name: Birbil, S.I.
Author-Name-Last: Birbil
Author-Name-First: Ilker
Author-Name: Frenk, J.B.G.
Author-Name-Last: Frenk
Author-Name-First: Hans
Title: Application of a General Risk Management Model to Portfolio Optimization Problems with Elliptical Distributed Returns for Risk Neutral and Risk Averse Decision Makers
Abstract: In this paper portfolio problems with linear loss functions and multivariate elliptical distributed returns are studied. We consider two risk measures, Value-at-Risk and Conditional-Value-at-Risk, and two types of decision makers, risk neutral and risk averse. For Value-at-Risk, we show that the optimal solution does not change with the type of decision maker. However, this observation is not true for Conditional-Value-at-Risk. We then show for Conditional-Value-at-Risk that the objective function can be approximated by Monte Carlo simulation using only a univariate distribution. To solve the equivalent Markowitz model, we modify and implement a finite step algorithm. Finally, a numerical study is conducted.
Creation-Date: 2007-05-24
File-URL: https://repub.eur.nl/pub/10151/ERS-2007-032-LIS.pdf
File-Format: application/pdf
Series: RePEc:ems:eureri
Number: ERS-2007-032-LIS
Classification-JEL: C61, G11, G3, M, M11
Keywords: Conditional value-at-risk, Disutility, Elliptical distributions, Linear loss functions, Portfolio optimization, Value-at-risk
Handle: RePEc:ems:eureri:10151