Composite time-consistent multi-period risk measure and its application in optimal portfolio selection

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• 作者：Zhiping Chen ; Jia Liu ; Gang Li ; Zhe Yan
• 关键词：Risk management ; Multi ; period risk measure ; Portfolio selection ; Scenario tree ; Time consistency
• 刊名：TOP
• 出版年：2016
• 出版时间：October 2016
• 年：2016
• 卷：24
• 期：3
• 页码：515-540
• 全文大小：603 KB
• 刊物主题：Operations Research/Decision Theory; Optimization; Statistics for Business/Economics/Mathematical Finance/Insurance; Industrial and Production Engineering; Game Theory/Mathematical Methods;
• 出版者：Springer Berlin Heidelberg
• ISSN：1863-8279
• 卷排序：24

文摘

Through the composition of two real-valued functions, we propose a new class of multi-period risk measure which is time consistent. The new multi-period risk measure is monotonous and convex when the two real-valued functions satisfy monotonicity and convexity. Based on this generic framework, we construct a specific class of time-consistent multi-period risk measure by considering the lower partial moment between the realized wealth and the target wealth at individual periods. With the new multi-period risk measure as the objective function, we formulate a multi-period portfolio selection model by considering transaction costs at individual investment periods. Furthermore, this stochastic programming model is transformed into a deterministic programming problem using the scenario tree technology. Finally, we show through empirical tests and comparisons the rationality, practicality and efficiency of our new multi-period risk measure and the corresponding portfolio selection model.