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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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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Abstract 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.
AbstractList 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.
Author Afhami, Bahareh
Vahed Maroufy
Madadi, Mohsen
Rezapour, Mohsen
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Multivariate analysis
Optimization
Risk
Title Portfolio Selection under Multivariate Merton Model with Correlated Jump Risk
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