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Article: Optimal portfolios under a value-at-risk constraint
Title | Optimal portfolios under a value-at-risk constraint |
---|---|
Authors | |
Keywords | Dynamic programming Optimal portfolio Value-at-risk |
Issue Date | 2004 |
Publisher | Elsevier 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? |
Abstract | This 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 Identifier | http://hdl.handle.net/10722/74313 |
ISSN | 2023 Impact Factor: 1.9 2023 SCImago Journal Rankings: 1.799 |
ISI Accession Number ID | |
References |
DC Field | Value | Language |
---|---|---|
dc.contributor.author | Yiu, KFC | en_HK |
dc.date.accessioned | 2010-09-06T07:00:06Z | - |
dc.date.available | 2010-09-06T07:00:06Z | - |
dc.date.issued | 2004 | en_HK |
dc.identifier.citation | Journal Of Economic Dynamics And Control, 2004, v. 28 n. 7, p. 1317-1334 | en_HK |
dc.identifier.issn | 0165-1889 | en_HK |
dc.identifier.uri | http://hdl.handle.net/10722/74313 | - |
dc.description.abstract | This 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.language | eng | en_HK |
dc.publisher | Elsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jedc | en_HK |
dc.relation.ispartof | Journal of Economic Dynamics and Control | en_HK |
dc.rights | Journal of Economic Dynamics and Control. Copyright © Elsevier BV. | en_HK |
dc.subject | Dynamic programming | en_HK |
dc.subject | Optimal portfolio | en_HK |
dc.subject | Value-at-risk | en_HK |
dc.title | Optimal portfolios under a value-at-risk constraint | en_HK |
dc.type | Article | en_HK |
dc.identifier.openurl | http://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+constraint | en_HK |
dc.identifier.email | Yiu, KFC:cedric@hkucc.hku.hk | en_HK |
dc.identifier.authority | Yiu, KFC=rp00206 | en_HK |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.doi | 10.1016/S0165-1889(03)00116-7 | en_HK |
dc.identifier.scopus | eid_2-s2.0-0347603907 | en_HK |
dc.identifier.hkuros | 99326 | en_HK |
dc.relation.references | http://www.scopus.com/mlt/select.url?eid=2-s2.0-0347603907&selection=ref&src=s&origin=recordpage | en_HK |
dc.identifier.volume | 28 | en_HK |
dc.identifier.issue | 7 | en_HK |
dc.identifier.spage | 1317 | en_HK |
dc.identifier.epage | 1334 | en_HK |
dc.identifier.isi | WOS:000188201800006 | - |
dc.publisher.place | Netherlands | en_HK |
dc.identifier.scopusauthorid | Yiu, KFC=24802813000 | en_HK |
dc.identifier.issnl | 0165-1889 | - |