ABSTRACT

The extant literature on portfolio management with VaR requirements has mostly focused on estimating the VaR associated with a predefined portfolio. However, this approach does not explicitly address the central problem of asset managers, whose objective is to account directly for VaR in the selection of optimal complex portfolios.*

The main purpose of this chapter is to develop a model for the selection of an optimal portfolio of stocks and options subject to value-at-risk

12.5.3 Observed Results 248 12.5.4 Variations 250

12.6 Conclusion 251 Acknowledgments 251 References 251

constraints, to demonstrate the computational feasibility of the approach, and to show the performances of different strategies.