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Article: Optimal portfolios under a value-at-risk constraint

TitleOptimal portfolios under a value-at-risk constraint
Authors
KeywordsDynamic programming
Optimal portfolio
Value-at-risk
Issue Date2004
PublisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jedc
Citation
Journal Of Economic Dynamics And Control, 2004, v. 28 n. 7, p. 1317-1334 How to Cite?
AbstractThis paper looks at the optimal portfolio problem when a value-at-risk constraint is imposed. This provides a way to control risks in the optimal portfolio and to fulfil the requirement of regulators on market risks. The value-at-risk constraint is derived for n risky assets plus a risk-free asset and is imposed continuously over time. The problem is formulated as a constrained utility maximization problem over a period of time. The dynamic programming technique is applied to derive the Hamilton-Jacobi-Bellman equation and the method of Lagrange multiplier is used to tackle the constraint. A numerical method is proposed to solve the HJB-equation and hence the optimal constrained portfolio allocation. Under this formulation, we find that investments in risky assets are optimally reduced by the imposed value-at-risk constraint. © 2003 Elsevier B.V. All rights reserved.
Persistent Identifierhttp://hdl.handle.net/10722/74313
ISSN
2015 Impact Factor: 0.879
2015 SCImago Journal Rankings: 0.937
ISI Accession Number ID
References

 

DC FieldValueLanguage
dc.contributor.authorYiu, KFCen_HK
dc.date.accessioned2010-09-06T07:00:06Z-
dc.date.available2010-09-06T07:00:06Z-
dc.date.issued2004en_HK
dc.identifier.citationJournal Of Economic Dynamics And Control, 2004, v. 28 n. 7, p. 1317-1334en_HK
dc.identifier.issn0165-1889en_HK
dc.identifier.urihttp://hdl.handle.net/10722/74313-
dc.description.abstractThis paper looks at the optimal portfolio problem when a value-at-risk constraint is imposed. This provides a way to control risks in the optimal portfolio and to fulfil the requirement of regulators on market risks. The value-at-risk constraint is derived for n risky assets plus a risk-free asset and is imposed continuously over time. The problem is formulated as a constrained utility maximization problem over a period of time. The dynamic programming technique is applied to derive the Hamilton-Jacobi-Bellman equation and the method of Lagrange multiplier is used to tackle the constraint. A numerical method is proposed to solve the HJB-equation and hence the optimal constrained portfolio allocation. Under this formulation, we find that investments in risky assets are optimally reduced by the imposed value-at-risk constraint. © 2003 Elsevier B.V. All rights reserved.en_HK
dc.languageengen_HK
dc.publisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jedcen_HK
dc.relation.ispartofJournal of Economic Dynamics and Controlen_HK
dc.rightsJournal of Economic Dynamics and Control. Copyright © Elsevier BV.en_HK
dc.subjectDynamic programmingen_HK
dc.subjectOptimal portfolioen_HK
dc.subjectValue-at-risken_HK
dc.titleOptimal portfolios under a value-at-risk constrainten_HK
dc.typeArticleen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=0165-1889&volume=28&issue=7&spage=1317&epage=1334&date=2004&atitle=Optimal+portfolios+under+a+value-at-risk+constrainten_HK
dc.identifier.emailYiu, KFC:cedric@hkucc.hku.hken_HK
dc.identifier.authorityYiu, KFC=rp00206en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1016/S0165-1889(03)00116-7en_HK
dc.identifier.scopuseid_2-s2.0-0347603907en_HK
dc.identifier.hkuros99326en_HK
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-0347603907&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume28en_HK
dc.identifier.issue7en_HK
dc.identifier.spage1317en_HK
dc.identifier.epage1334en_HK
dc.identifier.isiWOS:000188201800006-
dc.publisher.placeNetherlandsen_HK
dc.identifier.scopusauthoridYiu, KFC=24802813000en_HK

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