Title: Convergence of optimal portfolio under VaR with fat tails
Abstract: The paper studies the portfolio optimization problem under VaR measure where the distributions of returns are of fat tails. It has proved that the optimal portfolio based on the second order fat tails converges to the optimal portfolio based on the first order fat tails. The result shows that it need only construct the optimal portfolio based on the first order fat tails which is enough to guarantee a good approximating accuracy when the required risk level is sufficient low. Thus the complex computation for the portfolio optimization with higher order fat tails can be avoided.
Publication Year: 2002
Publication Date: 2002-01-01
Language: en
Type: article
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