A difference of convex formulation of value-at-risk constrained optimization

作者：Wozabal David^*; Hochreiter Ronald; Pflug Georg Ch

来源：Optimization, 2010, 59(3): 377-400.

DOI：10.1080/02331931003700731

• stochastic programming
• portfolio optimization
• D
• C
• optimization
• branch-and-bound

In this article, we present a representation of value-at-risk (VaR) as a difference of convex (D.C.) functions in the case where the distribution of the underlying random variable is discrete and has finitely many atoms. The D.C. representation is used to study a financial risk-return portfolio selection problem with a VaR constraint. A branch-and-bound algorithm that numerically solves the problem exactly is given. Numerical experiments with historical asset returns from representative market indices are performed to apply the algorithm to real-world financial market data.

• 出版日期2010