Optimization of conditional value-at risk

@article{Rockafellar2000OptimizationOC,
  title={Optimization of conditional value-at risk},
  author={R. Tyrrell Rockafellar and Stanislav Uryasev},
  journal={Journal of Risk},
  year={2000},
  volume={3},
  pages={21-41}
}
In an intensifying international competition banks are forced to place increased emphasis on enter-prise wide risk-/return management. Financial risks have to be limited and managed from a bank wide portfolio perspective. Risk management requirements have to be met from an internal as well as from a regulatory point of view. Banks need to maximize their expected returns under these constraints. This leads to a generalized portfolio optimization problem under different capital restrictions. We… 

Tables from this paper

Integrated Risk-/Return-Management Approach for the Bank Portfolio
In an intensifying international competition banks are forced to place increased emphasis on enterprise wide risk-/return management. Financial risks have to be limited and managed from a bank wide
Portfolio Optimization Under 'at-risk' Constraints
The financial crisis of 2008 brought with it a great interest in downside risk. This dissertation focus on portfolio optimization under downside risk constraints. We maximize the expected return
Risk-return optimization with different risk-aggregation strategies
Purpose - New methods of integrated risk modeling play an important role in determining the efficiency of bank portfolio management. The purpose of this paper is to suggest a systematic approach for
Risk Management for Hedge Fund Portfolios
TLDR
Numerical experiments show that imposing risk constraints may improve the “real” performance of a portfolio rebalancing strategy in out-of-sample runs, and it is beneficial to combine several types of risk constraints that control different sources of risk.
Economic Capital and Optimal Investment for Non-Life Insurance Companies
We propose two optimization models to jointly solve a capital requirement and a portfolio selection problem for non-life insurance companies. In a one-period framework, the expected return on
Comparative Analysis of Linear Portfolio Rebalancing Strategies: An Application to Hedge Funds
This paper applies formal risk management methodologies to optimization of a portfolio of hedge funds (fund of funds). We compare recently developed risk management methodologies: Conditional
An Integrated View of Risk Management: Portfolio Allocation Incorporating Credit Risk
Markowitz (1952, 1959) first proposed a well-known mean-variance analysis for optimizing portfolio diversification that has been long served as a foundation of modern finance. The risk
Robust Mean-Conditional Value at Risk Portfolio Optimization
In the portfolio optimization, the goal is to distribute the fixed capital on a set of investment opportunities to maximize return while managing risk. Risk and return are quantities that are used as
Value-At-Risk Based Approach For Currency Hedging
Corporate FX risk management has gained complexity with an increased number of currencies involved and varying correlations among them. Existing literature has highlighted the need to account for
Conditional Value-at-Risk Vs. Value-at-Risk to Multi-Objective Portfolio Optimization
This chapter presents a multi-criteria portfolio model with the expected return as a performance measure and the expected worst-case return as a risk measure. The problems are formulated as a
...
...

References

SHOWING 1-10 OF 75 REFERENCES
Risk and value at risk
A Minimax Portfolio Selection Rule with Linear Programming Solution
A new principle for choosing portfolios based on historical returns data is introduced; the optimal portfolio based on this principle is the solution to a simple linear programming problem. This
Mean-absolute deviation portfolio optimization model and its applications to Tokyo stock market
The purpose of this paper is to demonstrate that a portfolio optimization model using the L 1 risk (mean absolute deviation risk) function can remove most of the difficulties associated with the
An Overview of Value at Risk
This article gives a broad and accessible overview o f models o f value at risk (WR), a popular measure o f the market risk of afinancialfirm’s “book,” the list ofpositions in various instruments
Credit Risk of an International Bond Portfolio: A Case Study
We apply the CreditMetrics methodology to estimate the credit risk of a portfolio of long-dated corporate and sovereign bonds issued in emerging markets. Credit risk is decomposed into default and
Beyond VaR: from measuring risk to managing risk
  • Helmut E. MausserD. Rosen
  • Economics
    Proceedings of the IEEE/IAFE 1999 Conference on Computational Intelligence for Financial Engineering (CIFEr) (IEEE Cat. No.99TH8408)
  • 1999
TLDR
This paper examines tools for managing, as opposed to simply monitoring, a portfolio's value-at-risk (VaR), and reviews the parametric, or delta-normal versions of these tools and then extends them to the simulation based, or nonparametric case.
Extreme Value Theory as a Risk Management Tool
The financial industry, including banking and insurance, is undergoing major changes. The (re)insurance industry is increasingly exposed to catastrophic losses for which the requested cover is only
Value at risk - new approaches to risk management
Managing risk has always been an integral part of banking. In the past two years an approach to risk management called "Value at Risk" has been accepted by both practitioners and regulators as the
Conditional value-at-risk: optimization algorithms and applications
  • S. Uryasev
  • Computer Science
    Proceedings of the IEEE/IAFE/INFORMS 2000 Conference on Computational Intelligence for Financial Engineering (CIFEr) (Cat. No.00TH8520)
  • 2000
TLDR
A new approach for the simultaneous calculation of value-at-risk (VaR) and optimization of conditional VaR (CVaR) for a broad class of problems is outlined and it is shown that CVaR can be efficiently minimized using LP techniques.
Worldwide asset and liability modeling
Part I. Introduction: 1. Asset and liability management systems for long-term investors: discussion of the issues John M. Mulvey and William T. Ziemba Part II. Static Portfolio Analysis for Asset
...
...