The optimal portfolio of α-maxmin mean-VaR problem for investors

Zhilin Kang, Linhai Zhao and Jingyun Sun

Physica A: Statistical Mechanics and its Applications, 2019, vol. 526, issue C

Abstract: Value-at-Risk (VaR) is one of the most widely accepted risk measures in the financial industries, yet efficient computation of VaR remains a challenging issue. In this paper, we investigate an α-maxmin mean-VaR portfolio selection problem for investors when only partial information of the underlying distribution is available. Unlike the classical worst-case approach, which only deal with extremely ambiguity-averse attitude, our model is flexible and allows for investors with different levels of ambiguity aversion. Closed-form expressions for the optimal investment strategies are achieved and hence can be easily applied in practice. We illustrate the efficiency of our results with an example.

Keywords: α-maxmin; VaR; Distribution ambiguity; Ambiguity attitude (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:526:y:2019:i:c:s0378437119303784

DOI: 10.1016/j.physa.2019.04.014

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