Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

SOLUTIONS TO THE PORTFOLIO CHOICE PROBLEM WITH VAR OBJECTIVE FUNCTIONS

SOLUTIONS TO THE PORTFOLIO CHOICE PROBLEM WITH VAR OBJECTIVE FUNCTIONS In the context of modern portfolio theory (MPT), the actual weights of the market portfolio and cash are determined by investor preferences for risk and return. Value at risk (VaR) models specify losses with a percent frequency. VaR models are popular because they are easy to explain and interpret. In the context of MPT, the VaR limits in this study are used like a utility function for the investor. This paper develops closed-form solutions to the multi-asset portfolio choice problem using matrix algebra for the investor’s ideal portfolio weights, volatility, and expected returns where the VaR limit binds. JEL codes: G11 Keywords: modern portfolio theory (MPT); Value at Risk (VaR) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Economics, Management, and Financial Markets Addleton Academic Publishers

SOLUTIONS TO THE PORTFOLIO CHOICE PROBLEM WITH VAR OBJECTIVE FUNCTIONS

Economics, Management, and Financial Markets , Volume 10 (4): 18 – Jan 1, 2015

Loading next page...
 
/lp/addleton-academic-publishers/solutions-to-the-portfolio-choice-problem-with-var-objective-functions-ku70miNIwX
Publisher
Addleton Academic Publishers
Copyright
© 2009 Addleton Academic Publishers
ISSN
1842-3191
eISSN
1938-212X
Publisher site
See Article on Publisher Site

Abstract

In the context of modern portfolio theory (MPT), the actual weights of the market portfolio and cash are determined by investor preferences for risk and return. Value at risk (VaR) models specify losses with a percent frequency. VaR models are popular because they are easy to explain and interpret. In the context of MPT, the VaR limits in this study are used like a utility function for the investor. This paper develops closed-form solutions to the multi-asset portfolio choice problem using matrix algebra for the investor’s ideal portfolio weights, volatility, and expected returns where the VaR limit binds. JEL codes: G11 Keywords: modern portfolio theory (MPT); Value at Risk (VaR)

Journal

Economics, Management, and Financial MarketsAddleton Academic Publishers

Published: Jan 1, 2015

There are no references for this article.