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Portfolio Selection under Multivariate Merton Model with Correlated Jump Risk (2104.10240v1)
Published 20 Apr 2021 in math.ST, stat.AP, and stat.TH
Abstract: Portfolio selection in the periodic investment of securities modeled by a multivariate Merton model with dependent jumps is considered. The optimization framework is designed to maximize expected terminal wealth when portfolio risk is measured by the Condition-Value-at-Risk ($CVaR$). Solving the portfolio optimization problem by Monte Carlo simulation often requires intensive and time-consuming computation; hence a faster and more efficient portfolio optimization method based on closed-form comonotonic bounds for the risk measure $CVaR$ of the terminal wealth is proposed.
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