Article ID: | iaor200971925 |
Country: | Germany |
Volume: | 70 |
Issue: | 2 |
Start Page Number: | 219 |
End Page Number: | 239 |
Publication Date: | Oct 2009 |
Journal: | Mathematical Methods of Operations Research |
Authors: | Buerle Nicole, Mundt Andr |
Keywords: | optimization |
We consider a dynamic mean-risk problem, where the risk constraint is given by the Average Value–at–Risk. As financial market we choose a discrete-time binomial model which allows for explicit solutions. Problems where the risk constraint on the final wealth is replaced by intermediate risk constraints are also considered. The problems are solved with the help of the theory of Markov decision models and a Lagrangian approach.