Mean-Variance Portfolio Allocation with a Value at Risk Constraint

Enrique Sentana

Working Papers from CEMFI

Abstract: In this paper, I first provide a unifying approach to Mean-Variance analysis and Value at Risk, which highlights their similarities and differences. Then I use it to explain how fund managers can take investment decisions within the well-known Mean-Variance allocation framework that satisfy the VaR restrictions imposed on them by regulators. I do so by introducing a new type of line to the usual mean - standard deviation diagram, called IsoVaR, which represents all the portfolios that share the same VaR for a fixed probability level. Finally, I analyse the "shadow cost'' of a VaR constraint.

Date: 2001
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Mean Variance Portfolio Allocation with a Value at Risk Constraint (2001)
Working Paper: Mean-variance portfolio allocation with a value at risk constraint (2001)
Working Paper: Mean-Variance Portfolio allocation with a Value at Risk Constraint (2001)
Working Paper: Mean-Variance Portfolio Allocation with a Value at Risk Constraint (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:cmf:wpaper:wp2001_0105

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