Abstract

http://ssrn.com/abstract=2118681
 


 



Dynamic Tracking Error with Shortfall Control Using Stochastic Programming


Diana Barro


Ca Foscari University of Venice - Department of Economics; SSAV

Elio Canestrelli


Ca Foscari University of Venice - Department of Economics

2012

University Ca' Foscari of Venice, Dept. of Economics Research Paper Series No. 18/WP/2012

Abstract:     
In this contribution we propose a dynamic tracking error problem and we consider the problem of monitoring at discrete point the shortfall of the portfolio below a set of given reference levels of wealth. We formulate and solve the resulting dynamic optimization problem using stochastic programming. The resulting problem allows for a great flexibility in the combination of a tracking goal and a downside risk protection through a discrete monitoring of the shortfalls. We provide the results of a out-of-sample simulation experiments, on real data, for different portfolio configurations and different market conditions.

Number of Pages in PDF File: 16

Keywords: Dynamic portfolio optimization, Tracking error, Shortfall control

JEL Classification: C61, C63, G11

working papers series


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Date posted: July 28, 2012  

Suggested Citation

Barro, Diana and Canestrelli, Elio, Dynamic Tracking Error with Shortfall Control Using Stochastic Programming (2012). University Ca' Foscari of Venice, Dept. of Economics Research Paper Series No. 18/WP/2012. Available at SSRN: http://ssrn.com/abstract=2118681 or http://dx.doi.org/10.2139/ssrn.2118681

Contact Information

Diana Barro (Contact Author)
Ca Foscari University of Venice - Department of Economics ( email )
Cannaregio 873
Venice, 30121
Italy
SSAV ( email )
Venice
Italy
Elio Canestrelli
Ca Foscari University of Venice - Department of Economics ( email )
Cannaregio 873
Venice, 30121
Italy
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