Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5089507 | Journal of Banking & Finance | 2012 | 12 Pages |
Abstract
We study the effects of imposing repeated short-horizon regulatory constraints on long-term investors. We show that Value-at-Risk and Expected Shortfall constraints, when imposed dynamically, lead to similar optimal portfolios and wealth distributions. We also show that, in utility terms, the costs of imposing these constraints can be sizeable. For a 96% funded pension plan, both an annual Value-at-Risk constraint and an annual Expected Shortfall constraint can lead to an economic cost of about 2.5-3.8% of initial wealth over a 15-year horizon.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Zhen Shi, Bas J.M. Werker,