Portfolio Selection with Uncertain Exit Time: A Robust CVaR Approach

Publication Type

Journal Article

Publication Date

2-2008

Abstract

In this paper we explore the portfolio selection problem involving an uncertain time of eventual exit. To deal with this uncertainty, the worst-case CVaR methodology is adopted in the case where no or only partial information on the exit time is available, and the corresponding problems are integrated into linear programs which can be efficiently solved. Moreover, we present a method for specifying the uncertain information on the distribution of the exit time associated with exogenous and endogenous incentives. Numerical experiments with real market data and Monte Carlo simulation show the usefulness of the proposed model.

Keywords

Robust CVaR; Robust portfolio selection; Uncertain exit time

Discipline

Finance and Financial Management | Portfolio and Security Analysis

Research Areas

Finance

Publication

Journal of Economic Dynamics and Control

Volume

32

Issue

2

First Page

594

Last Page

623

ISSN

0165-1889

Identifier

10.1016/j.jedc.2007.03.003

Publisher

Elsevier

Additional URL

https://doi.org/10.1016/j.jedc.2007.03.003

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