Paper Info
Title
Continuous-time mean-variance portfolio optimization with Safety-First Principle
Abstract
This paper studies the portfolio optimization problem with multiple risk measures. More specifically, we use the variance and the Safety First Principle(SFP) as a combined risk measure in mean-risk portfolio optimization model. As the SFP measures the probability that random variable falls below certain level, combining SFP in the mean-variance formulation helps to control the downside risk of the portfolio return. Due to the complexity of such problem, it is difficult to solve such a problem by the traditional stochastic control approach directly. Under some assumptions of the market structure, we transform the incomplete market to complete one and derive the analytical portfolio policy by using the martingale approach. The simulation results exhibit prominent feature of our model in controlling the downside risk of the portfolio model.
Year
DOI
Venue
2014
10.1109/ICCA.2014.6870897
ICCA
Keywords
Field
DocType
optimisation,multiple risk measure,random variable,sfp,stochastic processes,random processes,safety-first principle,portfolio optimization problem,stochastic control approach,portfolio return,continuous-time mean-variance portfolio optimization,continuous time systems,analytical portfolio policy,mean-risk portfolio optimization model,risk management,investment,portfolio model,mean-variance formulation,probability,market structure,martingale approach,random variables,optimization
Mathematical optimization,Actuarial science,Downside risk,Control theory,Replicating portfolio,Modern portfolio theory,Portfolio,Portfolio optimization,Rate of return on a portfolio,Engineering,Superhedging price,Black–Litterman model
Conference
ISSN
Citations 
PageRank 
1948-3449
0
0.34
References 
Authors
0
2
Name
Order
Citations
PageRank
Yan Xiong151.18
Jianjun Gao25111.33