Abstract

http://ssrn.com/abstract=223323
 
 

References (15)



 
 

Citations (9)



 
 

Footnotes (3)



 


 



Portfolio Optimization with Drawdown Constraints


Alexei Chekhlov


Columbia University - Department of Mathematics

Stanislav P. Uryasev


University of Florida

Michael Zabarankin


Stevens Institute of Technology - Department of Mathematical Sciences

April 8, 2000

Research Report #2000-5

Abstract:     
A new one-parameter family of risk measures, which is called Conditional Drawdown-at-Risk (CDaR), is proposed. These measures of risk are functionals of the portfolio drawdown (underwater) curve considered in an active portfolio management. For some value of the tolerance parameter beta, the CDaR is defined as the mean of the worst (1-beta)*100% drawdowns. The CDaR risk measure contains the Maximal Drawdown and Average Drawdown as its limiting cases. For a particular example, the optimal portfolios for a case of Maximal Drawdown, a case of Average Drawdown, and several intermediate cases between these two were found. The CDaR family of risk measures is similar to Conditional Value-at-Risk (CVaR), which is also called Mean Shortfall, Mean Access loss, or Tail Value-at-Risk. Some recommendations on how to select the optimal risk measure for getting practically stable portfolios are provided. A real life portfolio allocation problem using the proposed measures was solved.

Number of Pages in PDF File: 17

JEL Classification: G10

working papers series


Download This Paper

Date posted: August 18, 2000  

Suggested Citation

Chekhlov, Alexei and Uryasev, Stanislav P. and Zabarankin, Michael, Portfolio Optimization with Drawdown Constraints (April 8, 2000). Research Report #2000-5. Available at SSRN: http://ssrn.com/abstract=223323 or http://dx.doi.org/10.2139/ssrn.223323

Contact Information

Alexei Chekhlov
Columbia University - Department of Mathematics ( email )
New York, NY
United States
HOME PAGE: http://www.math.columbia.edu/~chekhlov/
Stanislav P. Uryasev (Contact Author)
University of Florida ( email )
303 Weil Hall
Gainesville, FL 32611-6595
United States
352-392-3091 (Phone)
352-392-3537 (Fax)
HOME PAGE: http://www.ise.ufl.edu/uryasev/
Michael Zabarankin
Stevens Institute of Technology - Department of Mathematical Sciences ( email )
Hoboken, NJ 07030
United States
HOME PAGE: http://personal.stevens.edu/~mzabaran/
Feedback to SSRN


Paper statistics
Abstract Views: 3,641
Downloads: 1,120
Download Rank: 9,234
References:  15
Citations:  9
Footnotes:  3

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo3 in 0.437 seconds