Dynamic mean-variance portfolio optimization with Value-at-Risk constraint in continuous-time

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See all articles by Dian Yu

Dian Yu

affiliation not provided to SSRN

Weiping Wu

Fuzhou University - School of Economics and Management

Ke Zhou

Hunan University - Business School

Jianjun Gao

Shanghai University of Finance and Economics; Shanghai Jiao Tong University

Junguo Lu

Shanghai Jiao Tong University (SJTU) - Department of Automation

Date Written: December 15, 2020

Abstract

This paper studies the dynamic mean-risk portfolio optimization problem with variance and Value-at-Risk(VaR) as the risk measures in recognizing the importance of incorporating different risk measures in the portfolio management model. Using the martingale approach and combining it with the quantile optimization technique, we provide the solution framework for this problem and show that the optimal terminal wealth may have different patterns under a general market setting. When the market parameters are deterministic, we develop the closed-form solution for this problem. Examples are provided to illustrate the solution procedure of our method and demonstrate the beneft of our dynamic portfolio model comparing with its static counterpart.

Keywords: Dynamic mean-variance portfolio selection, Value-at-risk, Martingale approach, Dynamic portfolio optimization

Suggested Citation

Yu, Dian and wu, weiping and Zhou, Ke and Gao, Jianjun and Lu, Junguo, Dynamic mean-variance portfolio optimization with Value-at-Risk constraint in continuous-time (December 15, 2020). Available at SSRN: https://ssrn.com/abstract=3749311 or http://dx.doi.org/10.2139/ssrn.3749311

Dian Yu

affiliation not provided to SSRN

Weiping Wu (Contact Author)

Fuzhou University - School of Economics and Management ( email )

No. 2, Xueyuan Road, New District
No. 2, Xueyuan Road, New District
Fuzhou, Fujian 350108
China

Ke Zhou

Hunan University - Business School ( email )

Changsha, Hunan 410082
China

Jianjun Gao

Shanghai University of Finance and Economics ( email )

No. 100 Wudong Road
Shanghai, Shanghai 200433
China

Shanghai Jiao Tong University ( email )

800 Dongchuan Road
Shanghai
China
+86-18201925139 (Phone)
+86 34205004 (Fax)

Junguo Lu

Shanghai Jiao Tong University (SJTU) - Department of Automation ( email )

800 Dongchuan Road
Shanghai
China

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