Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
479364 | European Journal of Operational Research | 2007 | 12 Pages |
Abstract
In this paper, we consider an extension of the Markovitz model, in which the variance has been replaced with the Value-at-Risk. So a new portfolio optimization problem is formulated. We showed that the model leads to an NP-hard problem, but if the number of past observation T or the number of assets K are low, e.g. fixed to a constant, polynomial time algorithms exist. Furthermore, we showed that the problem can be formulated as an integer programming instance. When K and T are large and αVaR is small—as common in financial practice—the computational results show that the problem can be solved in a reasonable amount of time.
Related Topics
Physical Sciences and Engineering
Computer Science
Computer Science (General)
Authors
Stefano Benati, Romeo Rizzi,