Original title: Value at Risk application to FSD portfolio efficiency testing
Authors: Kopa, Miloš
Document type: Papers
Conference/Event: Managing and modeling of financial risks 2012, Ostrava (CZ), 2012-09-10 / 2012-09-11
Year: 2012
Language: eng
Abstract: The paper deals with efficiency testing of a given portfolio with respect to all other portfolios that can be created from the considered set of assets. The efficiency is based on the first order stochastic dominance (FSD) relation. A necessary and sufficient condition for the first order stochastic dominance criterion is expressed in terms of Value at Risks (VaRs). Consequently a FSD portfolio efficiency test based on VaRs is formulated. Contrary to the usual case, a general discrete distribution of portfolio returns is assumed what makes the test computationally more demanding comparing to the equiprobable scenarios case. Therefore we present a tractable reformulation of this test that turns constraints on VaRs into classical mixed-integer nonlinear programming problem.
Keywords: first order stochastic dominance; portfolio efficiency; Value at Risk
Project no.: GBP402/12/G097 (CEP)
Funding provider: GA ČR
Host item entry: Proceedings of Managing and Modelling of Financial Risks 2012, ISBN 978-80-248-2835-0

Institution: Institute of Information Theory and Automation AS ČR (web)
Document availability information: Fulltext is available at external website.
External URL: http://library.utia.cas.cz/separaty/2013/E/kopa-value at risk application to fsd portfolio efficiency testing.pdf
Original record: http://hdl.handle.net/11104/0216178

Permalink: http://www.nusl.cz/ntk/nusl-135964


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Research > Institutes ASCR > Institute of Information Theory and Automation
Conference materials > Papers