Portfolio Selection under Multivariate Merton Model with Correlated Jump Risk

Portfolio selection in the periodic investment of securities modeled by a multivariate Merton model with dependent jumps is considered. The optimization framework is designed to maximize expected terminal wealth when portfolio risk is measured by the Condition-Value-at-Risk (\(CVaR\)). Solving the p...

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Bibliographic Details
Published inarXiv.org
Main Authors Afhami, Bahareh, Rezapour, Mohsen, Madadi, Mohsen, Vahed Maroufy
Format Paper
LanguageEnglish
Published Ithaca Cornell University Library, arXiv.org 20.04.2021
Subjects
Monte Carlo simulation
Multivariate analysis
Optimization
Risk
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Summary:Portfolio selection in the periodic investment of securities modeled by a multivariate Merton model with dependent jumps is considered. The optimization framework is designed to maximize expected terminal wealth when portfolio risk is measured by the Condition-Value-at-Risk (\(CVaR\)). Solving the portfolio optimization problem by Monte Carlo simulation often requires intensive and time-consuming computation; hence a faster and more efficient portfolio optimization method based on closed-form comonotonic bounds for the risk measure \(CVaR\) of the terminal wealth is proposed.
ISSN:2331-8422