A Data-Driven Optimization Heuristic for Downside Risk Minimization

Manfred Gilli (), E. Kellezi and H. Hysi
Additional contact information
E. Kellezi: Mirabaud and Cie, Geneva
H. Hysi: Dept. of Econometrics University of Geneva

No 355, Computing in Economics and Finance 2006 from Society for Computational Economics

Abstract: In practical portfolio choice models risk is often defined as VaR, expected shortfall, maximum loss, Omega function, etc. and is computed from simulated future scenarios of the portfolio value. It is well known that the minimization of these functions can not, in general, be performed with standard methods. We present a multi-purpose data-driven optimization heuristic capable to deal efficiently with a variety of risk functions and practical constraints on the positions in the portfolio. The efficiency and robustness of the heuristic is illustrated by solving a collection of real world portfolio optimization problems using different risk functions such as VaR, expected shortfall, maximum loss and Omega function with the same algorithm

Keywords: Portfolio optimization; Heuristic optimization; Threshold accepting; Downside risk (search for similar items in EconPapers)
Date: 2006-07-04
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Citations: View citations in EconPapers (39)

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Working Paper: A Data-Driven Optimization Heuristic for Downside Risk Minimization (2006)
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