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- 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 Markets – Addleton Academic Publishers
Published: Jan 1, 2015