A Dynamic Risk Allocation of Value-at-Risks with Portfolios | Zendy

Yūji Yoshida | Zendy

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A Dynamic Risk Allocation of Value-at-Risks with Portfolios

Author(s) -

Yūji Yoshida

Publication year - 2012

Publication title -

journal of advanced computational intelligence and intelligent informatics

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.172

H-Index - 20

eISSN - 1343-0130

pISSN - 1883-8014

DOI - 10.20965/jaciii.2012.p0800

Subject(s) - dynamic programming , portfolio , mathematical optimization , computer science , bellman equation , value (mathematics) , stochastic programming , value at risk , process (computing) , expected value , portfolio optimization , risk management , mathematics , economics , statistics , finance , machine learning , operating system

A mathematical dynamic portfolio model with uncertainty is discussed by use of value-at-risks. The risk criterion is composed by the sum of unexpected shortterm risks which occur suddenly in each period. By dynamic programming approach, we derive an optimality condition for the optimal value-at-risk portfolio in a stochastic decision process. It is shown that the optimal value-at-risk is a solution of the optimality equation under a reasonable assumption, and an optimal trading strategy is obtained from the equation. A numerical example is given to illustrate our idea.

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