Sentana, Enrique (2001) Mean-variance portfolio allocation with a value at risk constraint. Discussion paper, 380. Financial Markets Group, London School of Economics and Political Science, London, UK.
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Abstract
In this paper, I first provide a unifying approach to Mean-Variance analysis and Value at Risk, which highlights both their similarities and differences. Then I use it to explain how fund managers can take investment decisions within the well-known Mean-Variance allocation framework that satisfy the VaR restrictions imposed by regulators. I do so by introducing a new type of line to the usual mean-standard deviation diagram, called IsoVaR, which represents all the portfolios that share the same VaR for a fixed probability level. Finally, I analyse the shadow cost of a VaR constraint.
| Item Type: | Monograph (Discussion Paper) |
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| Official URL: | http://fmg.lse.ac.uk |
| Additional Information: | © 2001 The Author |
| Library of Congress subject classification: | H Social Sciences > HG Finance H Social Sciences > HB Economic Theory |
| Sets: | Research centres and groups > Financial Markets Group (FMG) Collections > Economists Online Collections > LSE Financial Markets Group (FMG) Working Papers |
| Identification Number: | 380 |
| Date Deposited: | 28 Aug 2009 13:47 |
| URL: | http://eprints.lse.ac.uk/25058/ |
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