Abstract:
The work continues studying problems of using the continuous VaR-criterion (CC-VaR) in financial markets. The application of CC-VaR in a collection of one two-dimensional and two one-dimensional theoretical markets that are partly mutually connected by their underliers is concerned. The construction of the combined portfolio that is founded on misbalance in returns relative between markets with maintaining optimality on CC?VaR is submitted. The optimal combined portfolio with three components is constructed from basis instruments of all markets. The feasibility of the solution obtained is based on ideas of randomizing portfolio composition. The complication of the object investigated motivates applying a special econometric approach that allows the full analytical description of the object convenient for computations is used. Unlike former authors works that solved the problem CB very fruitful for theoretical investigations, here the more ordinary problem CG with the given initial investment amount and risk preferences functions depended on scale parameter is solved. The parameter value and the regular combined portfolio that achieves the maximum of the average income with fulfilling the CC-VaR need to be found. The constructions suggested are tested by an example with beta-distributed characteristics of the problem. Also an idealistic version of the combine portfolio that allows plotting two-dimension diagram for incarnating an idea of combining portfolios of different dimensions is constructed.
Keywords:underliers, continuous VaR-criterion (CC-VaR), risk preferences function (r.f.p.), forecast and cost densities, returns relative function,
Newman-Pearson procedure, forecast and cost functions, randomization, combine portfolio, idealistic portfolio.
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