Discrete time portfolio optimisation managing value at risk under heavy tail return distribution
Portfolio Management
2020-12-02 v2 Mathematical Finance
Abstract
We consider an investor, whose portfolio consists of a single risky asset and a risk free asset, who wants to maximize his expected utility of the portfolio subject to the Value at Risk assuming a heavy tail distribution of the stock prices return. We use Markov Decision Process and dynamic programming principle to get the optimal strategies and the value function which maximize the expected utility for parametric as well as non parametric distributions. Due to lack of explicit solution in the non parametric case, we use numerical integration for optimization
Keywords
Cite
@article{arxiv.1908.03907,
title = {Discrete time portfolio optimisation managing value at risk under heavy tail return distribution},
author = {Subhojit Biswas and Diganta Mukherjee},
journal= {arXiv preprint arXiv:1908.03907},
year = {2020}
}
Comments
Published in International Journal Mathematical Modelling and Numerical Optimisation, Vol. 10, No. 4, 2020