The optimal mean-variance investment strategy under value-at-risk constraints
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Publication:2445346
DOI10.1016/J.INSMATHECO.2012.05.004zbMATH Open1284.91535arXiv1011.4991OpenAlexW2082940395MaRDI QIDQ2445346FDOQ2445346
Publication date: 14 April 2014
Published in: Insurance Mathematics \& Economics (Search for Journal in Brave)
Abstract: This paper is devoted to study the effects arising from imposing a value-at-risk (VaR) constraint in mean-variance portfolio selection problem for an investor who receives a stochastic cash flow which he/she must then invest in a continuous-time financial market. For simplicity, we assume that there is only one investment opportunity available for the investor, a risky stock. Using techniques of stochastic linear-quadratic (LQ) control, the optimal mean-variance investment strategy with and without VaR constraint are derived explicitly in closed forms, based on solution of corresponding Hamilton-Jacobi-Bellman (HJB) equation. Furthermore, some numerical examples are proposed to show how the addition of the VaR constraint affects the optimal strategy.
Full work available at URL: https://arxiv.org/abs/1011.4991
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Cited In (16)
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- Non-concave portfolio optimization with average value-at-risk
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- Research on dynamic mean-variance portfolio selection under a value-at-risk constraint
- Optimal investment policy in the time consistent mean-variance formulation
- Optimal portfolio selection with VaR and portfolio insurance constraints under rank-dependent expected utility theory
- Robust optimal investment strategies for mean-variance asset-liability management under 4/2 stochastic volatility models
- Optimal portfolios under a value-at-risk constraint
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- Stochastic differential investment and reinsurance games with nonlinear risk processes and VaR constraints
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- What is the Opportunity Cost of Mean-Variance Investment Strategies?
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