# Robust Asset Allocation

@article{Ttnc2004RobustAA, title={Robust Asset Allocation}, author={Reha H. T{\"u}t{\"u}nc{\"u} and Matthias Koenig}, journal={Annals of Operations Research}, year={2004}, volume={132}, pages={157-187} }

This article addresses the problem of finding an optimal allocation of funds among different asset classes in a robust manner when the estimates of the structure of returns are unreliable. Instead of point estimates used in classical mean-variance optimization, moments of returns are described using uncertainty sets that contain all, or most, of their possible realizations. The approach presented here takes a conservative viewpoint and identifies asset mixes that have the best worst-case…

## 381 Citations

### Distributionally Robust Portfolio Optimization

- Computer Science2019 IEEE 58th Conference on Decision and Control (CDC)
- 2019

It is shown that determining the asset allocation that minimizes the distributionally robust risk can be done using quadratic programming and a one line search.

### Robust optimization and portfolio selection: The cost of robustness

- EconomicsEur. J. Oper. Res.
- 2011

### Robust Optimisation and Portfolio Selection: The Cost of Robustness

- Economics
- 2008

Robust optimization is a tractable alternative to stochastic programming particularly suited for problems in which parameter values are unknown, variable, and their distributions are uncertain. We…

### Robust Optimization Approaches to Single Period Portfolio Allocation Problem

- Economics
- 2016

Portfolio management is one of the fundamental problems in financial decision making. In a typical portfolio management problem, an investor is concerned with an optimal allocation of the capital…

### An estimation-free, robust conditional value-at-risk portfolio allocation model

- Economics
- 2008

A novel optimization model for risk-averse investors to obtain robust solutions for portfolio allocation problems that addresses the main practical limitations associated with classical portfolio allocation techniques, namely, the high sensitivity to model parameters and the difficulty to obtain accurate parameters’ estimates.

### Robust Optimization with Application in Asset Management

- Computer Science
- 2007

This dissertation first analyzes parametric convex conic optimization problems and corresponding robust problems with respect to stability properties and applies robustification to the well-known portfolio optimization problem of Markowitz.

### Robust portfolio asset allocation and risk measures

- MathematicsAnn. Oper. Res.
- 2013

This paper reviews several mathematical models, and related algorithmic approaches, that have recently been proposed to address uncertainty in portfolio asset allocation, focusing on Robust Optimization methodology, and analyzes the relationship between the concepts of robustness and convex risk measures.

### Robust portfolio asset allocation and risk measures

- MathematicsAnnals of Operations Research
- 2013

Many financial optimization problems involve future values of security prices, interest rates and exchange rates which are not known in advance, but can only be forecast or estimated. Several…

### Investigating the effectiveness of robust portfolio optimization techniques

- Computer Science, Economics
- 2011

Two well-known robust techniques when applied to a specific portfolio selection problem are investigated, and the portfolios selected by the respective robust counterparts are compared.

## References

SHOWING 1-10 OF 37 REFERENCES

### Robust Portfolio Selection Problems

- EconomicsMath. Oper. Res.
- 2003

This paper introduces "uncertainty structures" for the market parameters and shows that the robust portfolio selection problems corresponding to these uncertainty structures can be reformulated as second-order cone programs and, therefore, the computational effort required to solve them is comparable to that required for solving convex quadratic programs.

### Portfolio Optimization in Practice

- Economics
- 1992

These results suggest that, over the time period studied, international diversification into foreign bonds has offered some benefits. These benefits are best measured, however, by comparing the…

### Robust Mean-Variance Portfolio Selection

- Economics, Mathematics
- 2003

It is analytically and numerically shown that, under model misspecification, the use of statistically robust estimates instead of the widely used classical sample mean and covariance is highly beneficial for the stability properties of the mean-variance optimal portfolios.

### EQUILIBRIUM IN A CAPITAL ASSET MARKET

- Economics
- 1966

This paper investigates the properties of a market for risky assets on the basis of a simple model of general equilibrium of exchange, where individual investors seek to maximize preference functions…

### On the Sensitivity of Mean-Variance-Efficient Portfolios to Changes in Asset Means: Some Analytical and Computational Results

- Economics
- 1991

This paper investigates the sensitivity of mean-variance(MV)-efficient portfolios to changes in the means of individual assets. When only a budget constraint is imposed on the investment problem, the…

### Portfolio Optimization : The Robust Solution

- Computer Science
- 1999

Investment practitioners who use mean-variance optimization techniques for portfolio construction are often disappointed in the results. As many users of such algorithms swear at them as swear by…

### The worst-case risk of a portfolio

- Computer Science
- 2000

It is shown how to compute in a numerically efficient way the maximum risk of a portfolio, given uncertainty in the means and covariances of asset returns, which is more accurate and much faster than Monte Carlo methods.

### THE VALUATION OF RISK ASSETS AND THE SELECTION OF RISKY INVESTMENTS IN STOCK PORTFOLIOS AND CAPITAL BUDGETS

- Economics
- 1965

### Estimation for Markowitz Efficient Portfolios

- Mathematics
- 1980

Abstract Given a set of N assets a portfolio is determined by a set of weights xi, i = 1, 2, …, N; Σ N i=1 xi = 1 indicating the proportion of the value of the portfolio devoted to each asset. A…