The mean-variance-leverage (MVL) optimization model (Jacobs and Levy 2012, 2013a) tackles an issue not dealt with by the mean-variance optimization inherent in the general mean-variance portfolio selection model (GPSM) — that is, the impact on investor utility of the risks that are unique to...

Leverage entails a unique set of risks, such as margin calls, which can force investors to liquidate securities at adverse prices. Investors often seek to mitigate these risks by using a leverage constraint in conventional mean-variance portfolio optimization. Mean-variance optimization,...