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dc.contributor.authorRoman, D-
dc.contributor.authorMitra, G-
dc.identifier.citationWilmott Journal. 1(2): 69-85en
dc.description.abstractModern Portfolio Theory (MPT) is based upon the classical Markowitz model which uses variance as a risk measure. A generalization of this approach leads to mean-risk models, in which a return distribution is characterized by the expected value of return (desired to be large) and a risk value (desired to be kept small). Portfolio choice is made by solving an optimization problem, in which the portfolio risk is minimized and a desired level of expected return is specified as a constraint. The need to penalize different undesirable aspects of the return distribution led to the proposal of alternative risk measures, notably those penalizing only the downside part (adverse) and not the upside (potential). The downside risk considerations constitute the basis of the Post Modern Portfolio Theory (PMPT). Examples of such risk measures are lower partial moments, Value-at-Risk (VaR) and Conditional Value-at-Risk (CVaR). We revisit these risk measures and the resulting mean-risk models. We discuss alternative models for portfolio selection, their choice criteria and the evolution of MPT to PMPT which incorporates: utility maximization and stochastic dominance.en
dc.publisherWilmott Magazineen
dc.subjectRisk measuresen
dc.subjectUtility functionen
dc.subjectStochastic dominanceen
dc.subjectConditional value-at-risken
dc.titlePortfolio selection models: A review and new directionsen
dc.typeResearch Paperen
Appears in Collections:Dept of Mathematics Research Papers
Mathematical Sciences

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