Mean-variance portfolio allocation with a value at risk constraint

Preprint
Publisher Website
Google Scholar
  • 1 January 2001
    • preprint
      • Published in RePEc
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.

This publication has 0 references indexed in Scilit: