Portfolio Replication: Its Forward-Dual Decomposition

Authors:
A. S. Velichko;E. A. Nurminskii
Affiliations:
Institute of Automation and Control Processes, Far-Eastern Branch, Russian Academy of Sciences, Vladivostok, Russia;Institute of Automation and Control Processes, Far-Eastern Branch, Russian Academy of Sciences, Vladivostok, Russia
Venue:
Automation and Remote Control
Year:
2004

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Abstract

Replication of a portfolio of market assets under a conditional mean loss criterion is studied. This problem with a risk constraint as the conditional mean loss is studied as a structural extremal problem with binding variables and two groups of constraints. For a large number of assets and continual planning horizons, special methods based on the forward-dual decomposition algorithms are fruitful. Results of numerical experiments are given.