RAROC in portfolio optimization

Panagiotis Xidonas (), Christos E. Kountzakis (), Christis Hassapis () and Christos Staikouras
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Panagiotis Xidonas: Department of Finance, ESSCA, Paris, France
Christos E. Kountzakis: #x2020;Department of Mathematics, University of the Aegean, Karlovassi, GR-83200 Samos, Greece
Christis Hassapis: #x2021;Department of Economics, University of Cyprus, Cyprus

International Journal of Financial Engineering (IJFE), 2016, vol. 03, issue 03, 1-14

Abstract: In this paper, we provide the implications of using the performance ratio being defined by the expected shortfall-well known as RAROC-in static portfolio optimization, by giving the proof of the relevant results. We also use RAROC as a primary function in the AUGMECON algorithm, providing the main scheme of such an application on data from Athens Stock Exchange. The use of RAROC in AUGMECON as a primary function is also faced as an optimization problem under a general nonconvex optimization framework.

Keywords: Performance ratio; nonconvex optimization; convex optimization; augmented ε-constrained method (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1142/S2424786316500225

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