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preprint

Mean-Covariance Robust Risk Measurement

Nguyen, Viet Anh  
•
Shafieezadeh Abadeh, Soroosh  
•
Filipovic, Damir  
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2021

We introduce a universal framework for mean-covariance robust risk measurement and portfolio optimization. We model uncertainty in terms of the Gelbrich distance on the mean-covariance space, along with prior structural information about the population distribution. Our approach is related to the theory of optimal transport and exhibits superior statistical and computational properties than existing models. We find that, for a large class of risk measures, mean-covariance robust portfolio optimization boils down to the Markowitz model, subject to a regularization term given in closed form. This includes the finance standards, value-at-risk and conditional value-at-risk, and can be solved highly efficiently.

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Type
preprint
ArXiv ID

2112.09959

Author(s)
Nguyen, Viet Anh  
Shafieezadeh Abadeh, Soroosh  
Filipovic, Damir  
Kuhn, Daniel  
Date Issued

2021

Subjects

Robust optimization

•

Risk measurement

•

Optimal transport

Editorial or Peer reviewed

NON-REVIEWED

Written at

EPFL

EPFL units
RAO  
CSF  
Available on Infoscience
December 21, 2021
Use this identifier to reference this record
https://infoscience.epfl.ch/handle/20.500.14299/184057
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