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COBra: Copula-Based Portfolio Optimization


Paolella, Marc S; Polak, Pawel (2018). COBra: Copula-Based Portfolio Optimization. In: Kreinovich, Vladik; Sriboonchitta, Songsak; Chakpitak, Nopasit. Predictive Econometrics and Big Data. Cham: Springer International Publishing, 36-77.

Abstract

The meta-elliptical t copula with noncentral t GARCH univariate margins is studied as a model for asset allocation. A method of parameter estimation is deployed that is nearly instantaneous for large dimensions. The expected shortfall of the portfolio distribution is obtained by combining simulation with a parametric approximation for speed enhancement. A simulation-based method for mean-expected shortfall portfolio optimization is developed. An extensive out-of-sample backtest exercise is conducted and comparisons made with common asset allocation techniques.

Abstract

The meta-elliptical t copula with noncentral t GARCH univariate margins is studied as a model for asset allocation. A method of parameter estimation is deployed that is nearly instantaneous for large dimensions. The expected shortfall of the portfolio distribution is obtained by combining simulation with a parametric approximation for speed enhancement. A simulation-based method for mean-expected shortfall portfolio optimization is developed. An extensive out-of-sample backtest exercise is conducted and comparisons made with common asset allocation techniques.

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Additional indexing

Item Type:Book Section, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Scopus Subject Areas:Physical Sciences > Artificial Intelligence
Scope:Discipline-based scholarship (basic research)
Language:English
Date:2018
Deposited On:12 Nov 2020 06:10
Last Modified:24 May 2024 01:42
Publisher:Springer International Publishing
Series Name:Studies in Computational Intelligence
Number:753
ISBN:978-3-319-70941-3
OA Status:Closed
Publisher DOI:https://doi.org/10.1007/978-3-319-70942-0_3
Related URLs:https://link.springer.com/chapter/10.1007/978-3-319-70942-0_3 (Publisher)
Other Identification Number:merlin-id:19981
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