An intensive and still growing body of research focuses on estimating a portfolio’s Value-at-Risk.Depending on both the degree of non-linearity of the instruments comprised in the portfolio and thewillingness to make restrictive assumptions on the underlying statistical distributions, a...

Contemporary financial stochastic programs typically involve a trade-offbetween return and (downside)-risk. Using stochastic programming we characterize analytically (rather than numerically) the optimal decisions that follow from characteristic single-stage and multi-stage versions of such...

We characterize the investor’s optimal portfolio allocation subject to a budget constraint and a probabilistic VaR constraint in complete markets environments with a finite number of states. The set of feasible portfolios might no longer be connected or convex, while the number of local optima...

We show that if an agent is uncertain about the precise form of his utility function, his actual relative risk aversion may depend on wealth even if he knows his utility function lies in the class of constant relative risk aversion (CRRA) utility functions. We illustrate the consequences of this...

This paper features an analysis of the effectiveness of a range of portfolio diversi cation strategies, with a focus on down-side risk metrics, as a portfolio diversification strategy in a European market context. We apply these measures to a set of daily arithmetically compounded returns on a...

The Basel II Accord requires that banks and other Authorized Deposit-taking Institutions (ADIs) communicate their daily risk forecasts to the appropriate monetary authorities at the beginning of each trading day, using one or more risk models to measure Value-at-Risk (VaR). The risk estimates of...