Informatics and Applications

2020, Volume 14, Issue 3, pp 62-70

COMPUTATIONAL ASPECTS OF OPTIMIZATION ON CC-VaR IN A COMPLEX OF MARKETS

  • G. A. Agasandyan

Abstract

The work is the direct continuation of the previous author's investigation on using continuous VaR- criterion (CC-VaR) in a set of markets of different dimensions, which are mutually connected by their underliers.
The exposition is aimed at the application of ideas and methods developed for the theoretical continuous model to discrete scenarios markets. In a typical model case of a collection of one two-dimensional market and two one-dimensional markets, a rule of constructing a combined portfolio in these markets is submitted. This rule gives a necessary and sufficient condition of portfolio optimality in the weighted composition of basis instruments. The condition is founded on misbalance in returns relative between markets with maintaining optimality on CC-VaR.
The optimal combined portfolio with three components is constructed. Also, the idealistic and surrogate versions of this combined portfolio, which are useful in testing all algorithmic calculations and in graphic illustrating portfolio's payoff functions, are adduced. The model can be extended without difficulties, theoretic anyway, on markets of greater dimensions.

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