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Non-smooth optimization methods for computation of the Conditional Value-at-risk and portfolio optimization
- DOI:
- 10.1080/02331930600816353
pages 459-479
Available online: 29 Oct 2009Abstract
We examine numerical performance of various methods of calculation of the Conditional Value-at-risk (CVaR), and portfolio optimization with respect to this risk measure. We concentrate on the method proposed by Rockafellar and Uryasev in (Rockafellar, R.T. and Uryasev, S., 2000, Optimization of conditional value-at-risk. Journal of Risk, 2, 21–41), which converts this problem to that of convex optimization. We compare the use of linear programming techniques against a non-smooth optimization method of the discrete gradient, and establish the supremacy of the latter. We show that non-smooth optimization can be used efficiently for large portfolio optimization, and also examine parallel execution of this method on computer clusters.
Keywords
- Non-smooth optimization,
- Conditional Value-at-risk,
- Expected shortfall,
- Portfolio optimization,
- Numerical optimization
Keywords
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- Citation information:
- Available online: 29 Oct 2009
Author affiliations
- a School of Information Technology, Deakin University, 221 Burwood Hwy, Burwood 3125, Australia
- b Centre for Informatics and Applied Optimisation, School of Information Technology and Mathematical Sciences, University of Ballarat, Ballarat 3353, Australia
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