Paper on dynamic portfolio selection with logarithmic returns under RVaR released
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Hui Mi, Yuzhe Pan, and Zuo Quan Xu released a quantitative finance working paper on arXiv, studying the dynamic portfolio selection problem of Range Value-at-Risk (RVaR) in continuous-time financial markets, where performance and risk are measured by logarithmic returns. This study transforms dynamic optimization into a static quantile problem, characterizes the convex hull form of optimal terminal wealth through quantile representation, Lagrangian optimization, and convexification methods. It finds that pure RVaR minimization optimization may allocate zero terminal wealth in extremely adverse states, clarifies the shaping effect of interval quantile risk control on state-dependent portfolio returns, and connects the limiting cases of RVaR with VaR and ES.
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- arXiv q-finDynamic Portfolio Selection with Range Value-at-Risk under Logarithmic Returns
This paper focuses on the dynamic portfolio selection problem using Range Value-at-Risk (RVaR) in a continuous-time financial market, where performance and risk are measured by logarithmic returns. It transforms dynamic optimization into a static quantile problem, and characterizes the convex hull of optimal terminal wealth through quantile representation, Lagrangian optimization, and convexification methods. The study finds that pure RVaR minimization may allocate zero terminal wealth under extremely adverse states, clarifies how interval quantile risk control shapes state-dependent portfolio returns, and bridges the limiting cases of RVaR with VaR and ES.
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