We propose a robust portfolio optimization approach based on Value-at-Risk (VaR) adjusted Sharpe ratios. Traditional Sharpe ratio estimates based on limited historical return data are subject to estimation errors. Portfolio optimization based on traditional Sharpe ratios ignores this uncertainty...

Financial risk measurement relies on models of prices and other market variables, but models inevitably rely on imperfect assumptions and estimates, creating model risk. Moreover, optimization decisions, such as portfolio selection, amplify the effect of model error. In this work, we develop a...