Formulation of the Non-Parametric Value at Risk Portfolio Selection Problem Considering Symmetry

Wang, Dazhi; Chen, Yanhua; Wang, Hongfeng; Huang, Min

doi:10.3390/sym12101639

Cited by 6 publications

(1 citation statement)

References 38 publications

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“…As a result, many investors consider the MV problem too impractical to be used for real investments. The portfolio problem can be complicated with additional constraints to the optimization problem concerning transactional costs [11,28], subjective forecasts of the asset returns [29][30][31], predefined structure of the portfolio [32,23], portfolio problem with probabilistic definition of the risk (Value at Risk) [33,34]. The formalization of the portfolio problem can be provided in classical mini-max optimization problem [12], by fuzzy models [4,6,7], as multicriteria group decision-making problem [2,4,35], by bi-level definition of the portfolio problem [34,36].…”

Section: Portfolio Theory and Its Optimization Problemsmentioning

confidence: 99%

Decision Making in Real Estate: Portfolio Approach

Stoilov

Stoilova

Vladimirov

2021

Cybernetics and Information Technologies

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An investment policy is suggested about assets on real estate markets. Such analysis recommends investments in non-financial assets and optimization of the results from such decisions. The formalization of the investment policy is based on the portfolio theory for asset allocation. Two main criteria are applied for the decision making: return and risk. The decision support is based on Mean-Variance portfolio model. A dynamical and adaptive investment policy is derived for active portfolio management. Sliding procedure in time with definition and solution of a set of portfolio problems is applied. The decision defines the relative value of the investment to which real estates are to be allocated. The regional real estate markets of six Bulgarian towns, which identify the regions with potential for investments, are compared. The added value of the paper results in development of algorithm for a quantitative analysis of real estate markets, based on portfolio theory.

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Section: Portfolio Theory and Its Optimization Problemsmentioning

confidence: 99%

Decision Making in Real Estate: Portfolio Approach

Stoilov

Stoilova

Vladimirov

2021

Cybernetics and Information Technologies

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Prediction based mean-value-at-risk portfolio optimization using machine learning regression algorithms for multi-national stock markets

Behera

Pasayat

Behera

et al. 2023

Engineering Applications of Artificial Intelligence

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Pricing and Hedging Index Options under Mean-Variance Criteria in Incomplete Markets

2023

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This paper studies the portfolio selection problem where tradable assets are a bank account, and standard put and call options are written on the S&P 500 index in incomplete markets in which there exist bid–ask spreads and finite liquidity. The problem is mathematically formulated as an optimization problem where the variance of the portfolio is perceived as a risk. The task is to find the portfolio which has a satisfactory return but has the minimum variance. The underlying is modeled by a variance gamma process which can explain the extreme price movement of the asset. We also study how the optimized portfolio changes subject to a user’s views of the future asset price. Moreover, the optimization model is extended for asset pricing and hedging. To illustrate the technique, we compute indifference prices for buying and selling six options namely a European call option, a quadratic option, a sine option, a butterfly spread option, a digital option, and a log option, and propose the hedging portfolios, which are the portfolios one needs to hold to minimize risk from selling or buying such options, for all the options. The sensitivity of the price from modeling parameters is also investigated. Our hedging strategies are decent with the symmetry property of the kernel density estimation of the portfolio payout. The payouts of the hedging portfolios are very close to those of the bought or sold options. The results shown in this study are just illustrations of the techniques. The approach can also be used for other derivatives products with known payoffs in other financial markets.

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Formulation of the Non-Parametric Value at Risk Portfolio Selection Problem Considering Symmetry

Cited by 6 publications

References 38 publications

Decision Making in Real Estate: Portfolio Approach

Decision Making in Real Estate: Portfolio Approach

Prediction based mean-value-at-risk portfolio optimization using machine learning regression algorithms for multi-national stock markets

Pricing and Hedging Index Options under Mean-Variance Criteria in Incomplete Markets

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