Modeling value at risk through combination of simulation and optimization
by
Alexei A. Gaivoronski
Norwegian University of Science and Technology

We develop here dynamic asset allocation model which explicitly takes into account constraints on value at risk. This type of portfolio performance measure is difficult to treat using existing approaches due to its nonlinear character. We develop numerical approaches based on combination of simulation and optimization which is based on computation of sensitivities and allows to reduce considerably computational burden. As reference we consider application to asset allocation in insurance. High performance computing is important here due to serious computational requirements which arise from necessity of evaluation of high impact low probability events.

http://www.iot.ntnu.no/~alexeig

Date received: March 3, 1999

Copyright © 1999 by the author(s). The author(s) of this document and the organizers of the conference have granted their consent to include this abstract in Atlas Conferences Inc. Document # cacq-25.