The flow of cash funds from employer‐sponsored pension plans into mutual funds has been an important driving force behind the mutual fund industry's unprecedented recent growth. The increased attractiveness of mutual funds to pension investors is due to a shift from defined benefit to defined...

In this paper, we analyze the portfolio selection implications arising from imposing a value-at-risk (VaR) constraint on the mean-variance model, and compare them with those arising from the imposition of a conditional value-at-risk (CVaR) constraint. We show that for a given confidence level, a...

Financial institutions suffered large trading losses during the 2007–2009 global financial crisis. These losses cast doubt on the effectiveness of regulations and risk management systems based on a single Value-at-Risk (VaR) constraint. While some researchers have recommended using Conditional...

This paper examines the problem of deriving the tangent (or market) portfolio from a given set of risky assets and a specified risk-free borrowing and lending rate. Deriving the tangent portfolio involves solving a mathematical programming problem which can be specified as the minimization of a...

Das et al. (2010) develop an elegant framework where an investor selects portfolios within mental accounts but ends up holding an aggregate portfolio on the mean-variance frontier. This investor directly allocates the wealth in each account among available assets. In practice, however, investors...

Active portfolio management often involves the objective of selecting a portfolio with minimum tracking error variance (TEV) for some expected gain in return over a benchmark. However, Roll (1992) shows that such portfolios are generally suboptimal because they do not belong to the mean-variance...

Recognizing that many banks suffered trading losses that notably exceeded their minimum capital requirements during the recent crisis, the Basel Committee on Banking Supervision (2011) revised its regulatory framework for trading portfolios. In this paper, we compare: (1) the relative...