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JACIII Vol.16 No.7 pp. 800-806
doi: 10.20965/jaciii.2012.p0800
(2012)

Paper:

A Dynamic Risk Allocation of Value-at-Risks with Portfolios

Yuji Yoshida

Faculty of Economics and Business Administration, University of Kitakyushu, 4-2-1 Kitagata, Kokuraminami, Kitakyushu 802-8577, Japan

Received:
November 15, 2011
Accepted:
September 25, 2012
Published:
November 20, 2012
Keywords:
value-at-risk, portfolio, dynamic risk allocation, risk probability, dynamic programming
Abstract

A mathematical dynamic portfolio model with uncertainty is discussed by use of value-at-risks. The risk criterion is composed by the sum of unexpected shortterm risks which occur suddenly in each period. By dynamic programming approach, we derive an optimality condition for the optimal value-at-risk portfolio in a stochastic decision process. It is shown that the optimal value-at-risk is a solution of the optimality equation under a reasonable assumption, and an optimal trading strategy is obtained from the equation. A numerical example is given to illustrate our idea.

Cite this article as:
Yuji Yoshida, “A Dynamic Risk Allocation of Value-at-Risks with Portfolios,” J. Adv. Comput. Intell. Intell. Inform., Vol.16, No.7, pp. 800-806, 2012.
Data files:
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