Optimal Portfolio Projections for Skew-Elliptically Distributed Portfolio Returns

Nicola Loperfido, Tomer Shushi

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

Abstract

We define the concept of optimal portfolio projection, a procedure that projects the vector of weights of the portfolio return to a lower dimension such that one can explicitly solve the problem of optimal portfolio selection for any given risk measure. We study the class of skew-elliptically distributed risks and show that following the proposed procedure, we are able to obtain explicit optimal weights for such risks, with a dramatic reduction of the complexity of such an optimization problem.

Original languageEnglish
Pages (from-to)143-166
Number of pages24
JournalJournal of Optimization Theory and Applications
Volume199
Issue number1
DOIs
StatePublished - 1 Oct 2023

Keywords

  • Modern portfolio theory
  • Optimal portfolio selection
  • Projection theory
  • Risk measurement
  • Risk measures
  • Skew-elliptical distributions

ASJC Scopus subject areas

  • Control and Optimization
  • Management Science and Operations Research
  • Applied Mathematics

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