Monte Carlo Expected Wealth and Risk Measure Trade-Off Portfolio Optimization
Mäkinen, R. A. E., & Toivanen, J. (2024). Monte Carlo Expected Wealth and Risk Measure Trade-Off Portfolio Optimization. Siam Journal on Financial Mathematics, 15(2), SC41-SC53. https://doi.org/10.1137/23M1624439
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Siam Journal on Financial MathematicsDate
2024Copyright
© 2024 Society for Industrial and Applied Mathematics
A multiperiod portfolio optimization is described with Monte Carlo sampled risky asset paths under realistic constraints on the investment policies. The proposed approach can be used with various asset and risk models. It is flexible as it does not require dynamic programming or any transformations. As examples, the variance and semivariance risks are considered leading to mean-variance and mean-semivariance formulations, respectively. A quasi-Newton method with an adjoint gradient computation can solve the resulting optimization problems efficiently. Numerical examples show efficient frontiers together with optimal asset allocations computed for mean-variance and mean-semivariance portfolios with two and five assets.
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Society for Industrial & Applied Mathematics (SIAM)ISSN Search the Publication Forum
1945-497XKeywords
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https://converis.jyu.fi/converis/portal/detail/Publication/220705908
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Research Council of FinlandFunding program(s)
Academy Project, AoFAdditional information about funding
This work was funded by the Academy of Finland, project 295897.License
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