Mean-variance portfolio allocation with a value at risk constraint

Enrique Sentana

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: In this paper, I first provide a unifying approach to Mean-Variance analysis and Value at Risk, which highlights both 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 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.

JEL-codes: G11 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2001-05
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Citations: View citations in EconPapers (4)

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http://eprints.lse.ac.uk/25058/ Open access version. (application/pdf)

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:ehl:lserod:25058

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