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Article: Optimal portfolios under a value-at-risk constraint with applications to inventory control in supply chains

TitleOptimal portfolios under a value-at-risk constraint with applications to inventory control in supply chains
Authors
KeywordsHJB-equation
Inventory control
Optimal portfolio
Value-at-risk
Issue Date2008
PublisherAmerican Institute of Mathematical Sciences. The Journal's web site is located at http://aimsciences.org/journals/jimo/description.htm
Citation
Journal Of Industrial And Management Optimization, 2008, v. 4 n. 1, p. 81-94 How to Cite?
AbstractThe optimal portfolio problem under a VaR (value at risk) constraint is reviewed. Two different formulations, namely with and without consumption, are illustrated. This problem can be formulated as a constrained stochastic optimal control problem. The optimality conditions can be derived using the dynamic programming technique and the method of Lagrange multiplier can be applied to handle the VaR constraint. The method is extended for inventory management. Different from traditional inventory models of minimizing overall cost, the cashflow dynamic of a manufacturer is derived by considering a portfolio of inventory of raw materials together with income and consumption. The VaR of the portfolio of assets is derived and imposed as a constraint. Furthermore, shortage cost and holding cost can also be formulated as probabilistic constraints. Under this formulation, we find that holdings in high risk inventory are optimally reduced by the imposed value-at-risk constraint.
Persistent Identifierhttp://hdl.handle.net/10722/74502
ISSN
2015 Impact Factor: 0.776
2015 SCImago Journal Rankings: 0.639
References

 

DC FieldValueLanguage
dc.contributor.authorYiu, KFCen_HK
dc.contributor.authorWang, SYen_HK
dc.contributor.authorMak, KLen_HK
dc.date.accessioned2010-09-06T07:01:57Z-
dc.date.available2010-09-06T07:01:57Z-
dc.date.issued2008en_HK
dc.identifier.citationJournal Of Industrial And Management Optimization, 2008, v. 4 n. 1, p. 81-94en_HK
dc.identifier.issn1547-5816en_HK
dc.identifier.urihttp://hdl.handle.net/10722/74502-
dc.description.abstractThe optimal portfolio problem under a VaR (value at risk) constraint is reviewed. Two different formulations, namely with and without consumption, are illustrated. This problem can be formulated as a constrained stochastic optimal control problem. The optimality conditions can be derived using the dynamic programming technique and the method of Lagrange multiplier can be applied to handle the VaR constraint. The method is extended for inventory management. Different from traditional inventory models of minimizing overall cost, the cashflow dynamic of a manufacturer is derived by considering a portfolio of inventory of raw materials together with income and consumption. The VaR of the portfolio of assets is derived and imposed as a constraint. Furthermore, shortage cost and holding cost can also be formulated as probabilistic constraints. Under this formulation, we find that holdings in high risk inventory are optimally reduced by the imposed value-at-risk constraint.en_HK
dc.languageengen_HK
dc.publisherAmerican Institute of Mathematical Sciences. The Journal's web site is located at http://aimsciences.org/journals/jimo/description.htmen_HK
dc.relation.ispartofJournal of Industrial and Management Optimizationen_HK
dc.subjectHJB-equationen_HK
dc.subjectInventory controlen_HK
dc.subjectOptimal portfolioen_HK
dc.subjectValue-at-risken_HK
dc.titleOptimal portfolios under a value-at-risk constraint with applications to inventory control in supply chainsen_HK
dc.typeArticleen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=1547-5816&volume=4&issue=1&spage=81&epage=94&date=2008&atitle=Optimal+Portfolios+Under+A+Value-at-risk+Constraint+With+Applications+To+Inventory+Control+In+Supply+Chainsen_HK
dc.identifier.emailYiu, KFC:cedric@hkucc.hku.hken_HK
dc.identifier.emailMak, KL:makkl@hkucc.hku.hken_HK
dc.identifier.authorityYiu, KFC=rp00206en_HK
dc.identifier.authorityMak, KL=rp00154en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.scopuseid_2-s2.0-56649111143en_HK
dc.identifier.hkuros153738en_HK
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-56649111143&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume4en_HK
dc.identifier.issue1en_HK
dc.identifier.spage81en_HK
dc.identifier.epage94en_HK
dc.publisher.placeUnited Statesen_HK
dc.identifier.scopusauthoridYiu, KFC=24802813000en_HK
dc.identifier.scopusauthoridWang, SY=25654281500en_HK
dc.identifier.scopusauthoridMak, KL=7102680226en_HK

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