Hedging under multiple risk constraints
AbstractMotivated by the asset-liability management of a nuclear power plant operator, we consider the problem of finding the least expensive portfolio, which outperforms a given set of stochastic benchmarks. For a specified loss function, the expected shortfall with respect to each of the benchmarks weighted by this loss function must remain bounded by a given threshold. We consider different alternative formulations of this problem in a complete market setting, establish the relationship between these formulations, present a general resolution methodology via dynamic programming in a non-Markovian context and give explicit solutions in special cases.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1309.5094.
Date of creation: Sep 2013
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Web page: http://arxiv.org/
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-09-25 (All new papers)
- NEP-FMK-2013-09-25 (Financial Markets)
- NEP-LAM-2013-09-25 (Central & South America)
- NEP-LTV-2013-09-25 (Unemployment, Inequality & Poverty)
- NEP-NEU-2013-09-25 (Neuroeconomics)
- NEP-RMG-2013-09-25 (Risk Management)
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