Portfolio Optimization via a Surrogate Risk Measure: Conditional Desirability Value at Risk (CDVaR)
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Dosyalar
Tarih
2019
Yazarlar
Dergi Başlığı
Dergi ISSN
Cilt Başlığı
Yayıncı
Springer International Publishing Ag
Erişim Hakkı
info:eu-repo/semantics/closedAccess
Özet
A risk measure that specifies minimum capital requirements is the amount of cash that must be added to a portfolio to make its risk acceptable to regulators. The 2008 financial crisis highlighted the demise of the most widely used risk measure, Value-at-Risk. Unlike the Conditional VaR model of Rockafellar & Uryasev, VaR ignores the possibility of abnormal returns and is not even a coherent risk measure as defined by Pflug. Both VaR and CVaR portfolio optimizers use asset-price return histories. Our novelty here is introducing an annual Desirability Value (DV) for a company and using the annual differences of DVs in CVaR optimization, instead of simply utilizing annual stock-price returns. The DV of a company is the perpendicular distance from the fundamental position of that company to the best separating hyperplane H-0 that separates profitable companies from losers during training. Thus, we introduce both a novel coherent surrogate risk measure, Conditional-Desirability-Value-at-Risk (CDVaR) and a direction along which to reduce (downside) surrogate risk, the perpendicular to H-0. Since it is a surrogate measure, CDVaR optimization does not produce a cash amount as the risk measure. However, the associated CVaR (or VaR) is trivially computable. Our machine-learning-fundamental-analysis-based CDVaR portfolio optimization results are comparable to those of mainstream price-returns-based CVaR optimizers.
Açıklama
12th International Conference on Learning and Intelligent Optimization (LION) -- JUN 10-15, 2018 -- Kalamata, GREECE
Anahtar Kelimeler
Portfolio optimization, Machine learning, Risk management, Downside risk, Conditional value at risk, Linear programming, Fundamental analysis, International financial reporting standards, Model
Kaynak
Learning and Intelligent Optimization, Lion 12
WoS Q Değeri
N/A
Scopus Q Değeri
Q3
Cilt
11353
