Title: Minimizing Conditional Value-at-Risk under Constraint on Expected Value
Abstract: Conditional Value-at-Risk (CVaR) measures the expected loss amount beyond VaR. It has vast advantage over VaR because of its property of coherence. This paper gives an analytical solution in a complete market setting to the risk reward problem faced by a portfolio manager whose portfolio needs to be continuously rebalanced to minimize risk taken (measured by CVaR) while meeting the reward goal (measured by expected return). The optimal portfolio is identified whenever it exists, and the associated minimal risk is calculated. An example in the Black-Scholes framework is cited where dynamic hedging strategy is calculated and the efficient frontier is plotted.
Publication Year: 2009
Publication Date: 2009-01-01
Language: en
Type: article
Access and Citation
AI Researcher Chatbot
Get quick answers to your questions about the article from our AI researcher chatbot