Multistage optimization of option portfolio using higher order coherent risk measures

Multistage optimization of option portfolio using higher order coherent risk measures

0.00 Avg rating0 Votes
Article ID: iaor20131075
Volume: 227
Issue: 1
Start Page Number: 190
End Page Number: 198
Publication Date: May 2013
Journal: European Journal of Operational Research
Authors: ,
Keywords: risk
Abstract:

Choosing a suitable risk measure to optimize an option portfolio’s performance represents a significant challenge. This paper is concerned with illustrating the advantages of Higher order coherent risk measures to evaluate option risk’s evolution. It discusses the detailed implementation of the resulting dynamic risk optimization problem using stochastic programming. We propose an algorithmic procedure to optimize an option portfolio based on minimization of conditional higher order coherent risk measures. Illustrative examples demonstrate some advantages in the performance of the portfolio’s levels when higher order coherent risk measures are used in the risk optimization criterion.

Reviews

Required fields are marked *. Your email address will not be published.