Portfolio optimization with structured products under return constraint | Zendy

Meena Baweja | Zendy; Ratnesh R. Saxena | Zendy

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Portfolio optimization with structured products under return constraint

Author(s) -

Meena Baweja,

Ratnesh R. Saxena

Publication year - 2014

Publication title -

yugoslav journal of operations research

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.221

H-Index - 21

eISSN - 1820-743X

pISSN - 0354-0243

DOI - 10.2298/yjor130803002b

Subject(s) - cvar , portfolio optimization , expected shortfall , portfolio , mathematical optimization , efficient frontier , constraint (computer aided design) , rate of return on a portfolio , post modern portfolio theory , investment (military) , computer science , risk–return spectrum , investment strategy , replicating portfolio , economics , microeconomics , financial economics , mathematics , geometry , politics , political science , law , profit (economics)

A new approach for optimizing risk in a portfolio of financial instruments involving structured products is presented. This paper deals with a portfolio selection model which uses optimization methodology to minimize conditional Value-at-Risk (CVaR ) under return constraint. It focuses on minimizing CVaR rather than on minimizing value-at-Risk VaR, as portfolios with low CVaR necessarily have low VaR as well. We consider a simple investment problem where besides stocks and bonds, the investor can also include structured products into the investment portfolio. Due to possible intermediate payments from structured product, we have to deal with a re-investment problem modeled as a linear optimization problem

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