Name
Title | ||
|---|---|---|
Optimal selection of a portfolio of options under Value-at-Risk constraints: a scenario approach |
Abstract | ||
|---|---|---|
This paper introduces a multiperiod model for the optimal selection of a financial portfolio of options linked to a single
index. The objective of the model is to maximize the expected return of the portfolio under constraints limiting its Value-at-Risk.
We rely on scenarios to represent future security prices. The model contains several interesting features, like the consideration
of transaction costs, bid-ask spreads, arbitrage-free option pricing, and the possibility to rebalance the portfolio with
options introduced at the start of each period. The resulting mixed integer programming model is applied to realistic test
instances involving options on the S&P500 index. In spite of the large size and of the numerical difficulty of this model,
near-optimal solutions can be computed by a standard branch-and-cut solver or by a specialized heuristic. The structure and
the financial features of the selected portfolios are also investigated. |
Year | DOI | Venue |
|---|---|---|
2010 | 10.1007/s10479-009-0636-y | Annals OR |
Keywords | Field | DocType |
indexation,value at risk,transaction cost,branch and cut,option pricing,operations research | Binomial options pricing model,Mathematical optimization,Valuation of options,Application portfolio management,Replicating portfolio,Portfolio,Portfolio optimization,Strike price,Trinomial tree,Mathematics | Journal |
Volume | Issue | ISSN |
181 | 1 | 1572-9338 |
Citations | PageRank | References |
0 | 0.34 | 7 |
Authors | ||
3 | ||
Name | Order | Citations | PageRank |
|---|---|---|---|
| Michaël Schyns | 1 | 45 | 4.68 |
| Yves Crama | 2 | 547 | 63.94 |
| G. Hübner | 3 | 0 | 0.34 |