Portfolio optimization with CVaR under Bilateral Gamma process

Formal portfolio optimization methodologies describe the dynamics of financial instruments price with GaussianCopula (GC). Without considering the sassets return rate, optimization with GC underestimate theoptimal CVaR of portfolio. In the present paper, we develop theapproach for portfolio optimization by introducing levyprocesses. It focuses on describing the dynamics of aprice with Bilateral Gamma Copula (BGC) rather than GC. Acase study for three indexes of Chinese Stock Market inperformed. On application purpose, we calculate the best hedgepositions of Shanghai Index (SHI), Shenzen Index (SZI) andSmall Cap Index (SCI) with the performance function CVaRunder BG model. It can be combined with Monte CarloSimulation and nonlinear programing techniframework is suitable for any investment companies.

کلیدواژه ها:

Portfolio ، CVaR ، Bilateral Gamma ، Copula ، Monte Carlo