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|Title:||Mean-risk models using two risk measures: A multi-objective approach|
|Publisher:||The Centre for the Analysis of Risk and Optimisation Modelling Applications (CARISMA), Brunel University|
|Citation:||CTR/51/06: Mean-Risk Models using Two Risk Measures: A Multi-Objective Approach|
|Series/Report no.:||Technical Reports;51/06|
|Abstract:||This paper proposes a model for portfolio optimisation, in which distributions are characterised and compared on the basis of three statistics: the expected value, the variance and the CVaR at a specified confidence level. The problem is multi-objective and transformed into a single objective problem in which variance is minimised while constraints are imposed on the expected value and CVaR. In the case of discrete random variables, the problem is a quadratic program. The mean-variance (mean-CVaR) efficient solutions that are not dominated with respect to CVaR (variance) are particular efficient solutions of the proposed model. In addition, the model has efficient solutions that are discarded by both mean-variance and mean-CVaR models, although they may improve the return distribution. The model is tested on real data drawn from the FTSE 100 index. An analysis of the return distribution of the chosen portfolios is presented.|
|Appears in Collections:||Dept of Mathematics Research Papers|
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