Dynamic Average Value-at-Risk Allocation on Worst Scenarios in Asset Management
A dynamic portfolio optimization model with average value-at-risks is discussed for drastic declines of asset prices. Analytical solutions for the optimization at each time are obtained by mathematical programming. By dynamic programming, an optimality equation for optimal average value-at-risks over time is derived. The optimal portfolios and the corresponding average value-at-risks are given as solutions of the optimality equation. A numerical example is given to understand the solutions and the results.
This research is supported from JSPS KAKENHI Grant Number JP 16K05282.