A log-robust optimization approach to portfolio management

• Published in: OR Spectrum Vol. 33; no. 1; pp. 207 - 233
• Main Authors: Kawas, Ban, Thiele, Aurélie
• Format: Journal Article
• Language: English
• Published: Berlin/Heidelberg Springer-Verlag 2011; Springer Nature B.V
• Subjects: Asset allocation; Budgeting; Business and Management; Calculus of Variations and Optimal Control; Optimization; Construction; Deviation; Linear programming; Management; Mathematical models; Normal distribution; Operations research; Operations Research/Decision Theory; Optimization; Portfolio management; Prices; Random variables; Rates of return; Raw materials; Regular Article; Risk; Short sales; Standard deviation; Stock prices; Stocks; Studies; Uncertainty; Convex optimization; Portfolio management; Robust optimization

We present a robust optimization approach to portfolio management under uncertainty that builds upon insights gained from the well-known Lognormal model for stock prices, while addressing the model’s limitations, in particular, the issue of fat tails being underestimated in the Gaussian framework an...