Multistage risk premiums in portfolio optimization

Miloš Kopa; Barbora Petrová

Kybernetika (2017)

  • Volume: 53, Issue: 6, page 992-1011
  • ISSN: 0023-5954

Abstract

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This paper deals with a multistage stochastic programming portfolio selection problem with a new type of risk premium constraints. These risk premiums are constructed on the multistage scenario tree. Two ways of the construction are introduced and compared. The risk premiums are incorporated in the multistage stochastic programming portfolio selection problem. The problem maximizes the multivariate (multiperiod) utility function under condition that the multistage risk premiums are smaller than a prescribed level. The problem does not assume any separability of the multiperiod utility function. The performance of the suggested models is demonstrated for several kinds of multiperiod utility functions and several formulations of the multistage risk premium constraints. In all cases, including the risk premium constraints avoids the riskier positions.

How to cite

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Kopa, Miloš, and Petrová, Barbora. "Multistage risk premiums in portfolio optimization." Kybernetika 53.6 (2017): 992-1011. <http://eudml.org/doc/294565>.

@article{Kopa2017,
abstract = {This paper deals with a multistage stochastic programming portfolio selection problem with a new type of risk premium constraints. These risk premiums are constructed on the multistage scenario tree. Two ways of the construction are introduced and compared. The risk premiums are incorporated in the multistage stochastic programming portfolio selection problem. The problem maximizes the multivariate (multiperiod) utility function under condition that the multistage risk premiums are smaller than a prescribed level. The problem does not assume any separability of the multiperiod utility function. The performance of the suggested models is demonstrated for several kinds of multiperiod utility functions and several formulations of the multistage risk premium constraints. In all cases, including the risk premium constraints avoids the riskier positions.},
author = {Kopa, Miloš, Petrová, Barbora},
journal = {Kybernetika},
keywords = {multistage risk premium; utility function; portfolio optimization; multistage stochastic programming},
language = {eng},
number = {6},
pages = {992-1011},
publisher = {Institute of Information Theory and Automation AS CR},
title = {Multistage risk premiums in portfolio optimization},
url = {http://eudml.org/doc/294565},
volume = {53},
year = {2017},
}

TY - JOUR
AU - Kopa, Miloš
AU - Petrová, Barbora
TI - Multistage risk premiums in portfolio optimization
JO - Kybernetika
PY - 2017
PB - Institute of Information Theory and Automation AS CR
VL - 53
IS - 6
SP - 992
EP - 1011
AB - This paper deals with a multistage stochastic programming portfolio selection problem with a new type of risk premium constraints. These risk premiums are constructed on the multistage scenario tree. Two ways of the construction are introduced and compared. The risk premiums are incorporated in the multistage stochastic programming portfolio selection problem. The problem maximizes the multivariate (multiperiod) utility function under condition that the multistage risk premiums are smaller than a prescribed level. The problem does not assume any separability of the multiperiod utility function. The performance of the suggested models is demonstrated for several kinds of multiperiod utility functions and several formulations of the multistage risk premium constraints. In all cases, including the risk premium constraints avoids the riskier positions.
LA - eng
KW - multistage risk premium; utility function; portfolio optimization; multistage stochastic programming
UR - http://eudml.org/doc/294565
ER -

References

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