Asset Allocation under VaR or LEL Risk Management Constraint
Date Issued
2014
Date
2014
Author(s)
Yu, Chiung-Hua
Abstract
In this paper we investigate on asset allocation under risk management constraints like VaR or LEL. Based on the time-T wealth pattern in the research of Basak and Shaprio(2001), we adjust slightly the pattern with terminal price of underlying asset and time-T wealth. We analyze the differences through different parameters to find optimal asset allocation with static replication. Our results show that as a risk manager becomes more risk averse, as the market price of risk decreases, or as given probability rises, the manager invests more in the risk-free assets. Effective risk management strategies allow the participants in the capital market to identify the companies’ potential risks. Our paper provides some suggestions on risk management for those who control enormous amount of capital like financial intermediaries and insurance companies.
Subjects
資產配置
VaR風險值
LEL風險管理
靜態複製
Type
thesis
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