Title

Portfolio Selection under Distributional Uncertainty: A Relative Robust CVaR in Portfolio Management

Publication Type

Journal Article

Publication Date

5-2010

Abstract

Robust optimization, one of the most popular topics in the field of optimization and control since the late 1990s, deals with an optimization problem involving uncertain parameters. In this paper, we consider the relative robust conditional value-at-risk portfolio selection problem where the underlying probability distribution of portfolio return is only known to belong to a certain set. Our approach not only takes into account the worst-case scenarios of the uncertain distribution, but also pays attention to the best possible decision with respect to each realization of the distribution. We also illustrate how to construct a robust portfolio with multiple experts (priors) by solving a sequence of linear programs or a second-order cone program.

Keywords

Conditional value-at-risk; Worst-case conditional value-at-risk; Relative robust conditional value-at-risk; Portfolio selection problem; Linear programming

Discipline

Finance and Financial Management | Portfolio and Security Analysis

Research Areas

Finance

Publication

European Journal of Operational Research

Volume

203

Issue

1

First Page

185

Last Page

194

ISSN

0377-2217

Identifier

10.1016/j.ejor.2009.07.010

Publisher

Elsevier

Additional URL

http://dx.doi.org/10.1016/j.ejor.2009.07.010

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