Intra-daily FX optimal portfolio allocation

Luc Bauwens, Walid Ben Omrane and Erick Rengifo

No 2006010, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: We design and implement optimal foreign exchange portfolio allocations. An optimal allocation maximizes the expected return sub ject to a Value-at-Risk (VaR) constraint. Based on intradaily data, the optimization procedure is carried out at regular time intervals. For the estimation of the conditional variance from which the VaR is computed, we use univariate and multivariate GARCH models. The result for each model is given by the best intradaily investment recom- mendations in terms of the optimal weights of the currencies in the risky portfolio

Keywords: optimal portfolio selection; Value-at-Risk; GARCH models; foreign ex- change markets (search for similar items in EconPapers)
JEL-codes: C32 C53 G11 (search for similar items in EconPapers)
Date: 2006-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Intra-Daily FX Optimal Portfolio Allocation (2006)
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