Article ID: | iaor200973303 |
Volume: | 58 |
Issue: | 3 |
Start Page Number: | 291 |
End Page Number: | 304 |
Publication Date: | Apr 2009 |
Journal: | Optimization |
Authors: | Korn Ralf, Zeytun Serkan |
Keywords: | value at risk |
We consider a simple investment problem where besides stocks and bonds the investor can also include options (or structured products) into the investment portfolio. The aim of the investor is to maximize the expected return under a conditional value-at-risk (CVaR) constraint. Due to possible intermediate payments, we have to deal with a re-investment problem which turns the original one-period problem into a multi-period one. For solving this problem, an iterative scheme based on linear optimization is developed.