On loss‐avoiding payoff distribution in a dynamic portfolio management problem

Jacek B. Krawczyk

Journal of Risk Finance, 2008, vol. 9, issue 2, 151-172

Abstract: Purpose - The aim of this paper is to propose and analyse policies capable of generating left‐skewed pension distributions. Such policies can deliver large pension values with high probability and hence are of interest to practical fund managers. Design/methodology/approach - The paper uses a computational method capable of solving stochastic optimal control problems. The optimal strategies obtained through the method are used to simulate dynamic portfolio management. Findings - The paper finds that optimisation of locally non‐concave performance measures has produced left‐skewed payoff distributions of small VaR and CVaR. The distributions remain left‐skewed for relatively large values of the diffusion parameter. Practical implications - On the basis of the findings, it would seem beneficial for real‐world fund managers to implement this kind of optimising “cautious‐relaxed” policy. Originality/value - A novel non‐concave performance measure has been proposed in the paper to describe a portfolio manager's aim. The computed “cautious‐relaxed” policies have been shown to realise this aim.

Keywords: Pension funds; Portfolio investment; Loss prevention; Numerical analysis; Optimization techniques (search for similar items in EconPapers)
Date: 2008
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:jrfpps:15265940810853913

DOI: 10.1108/15265940810853913

Access Statistics for this article

Journal of Risk Finance is currently edited by Nawazish Mirza

More articles in Journal of Risk Finance from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().