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Robust Portfolio Protection: A Scenarios-based Approach

Author

Listed:
  • Selim Mankaï

    (École Universitaire de Management & IAE Université d’Auvergne, IPAG Lab - IPAG Business Schoo)

  • Khaled Guesmi

    (IPAG Lab - IPAG Business School)

Abstract

This paper constructs a portfolio protection model to deal with uncertain adverse returns. Our model considers an adjustable discrete uncertainty set to control the conservatism of the robust portfolio. Without prior assumptions on the data generating process, we develop an a priori probabilistic guarantee of the robust portfolio. Unlike previous measures that depend solely on the uncertainty model, our measure also takes into account asset allocation and investment horizon. We provide an application of international portfolio protection covering the financial crisis period. Computational experiments and ex-post analysis provide evidence for the effectiveness of our model.

Suggested Citation

  • Selim Mankaï & Khaled Guesmi, 2015. "Robust Portfolio Protection: A Scenarios-based Approach," Bankers, Markets & Investors, ESKA Publishing, issue 138, pages 30-44, September.
    • Handle: RePEc:rbq:journl:i:138:p:30-44
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    References listed on IDEAS

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    More about this item

    Keywords

    Portfolio protection; Robust optimization; Multivariate tail dependence; Nonparametric predictive inference;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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