6533b82bfe1ef96bd128d4dc
RESEARCH PRODUCT
Liquidity-adjusted value-at-risk optimization of a multi-asset portfolio using a vine copula approach
Mazin A. M. Al JanabiRomán FerrerSyed Jawad Hussain Shahzadsubject
Statistics and ProbabilityCondensed Matter Physics01 natural sciences010305 fluids & plasmasMarket liquidityVine copulaStock portfolio0103 physical sciencesEconometricsEconomicsPortfolioPortfolio optimization010306 general physicsBudget constraintValue at riskStock (geology)description
Abstract This paper develops a novel approach to assess liquidity-adjusted Value-at-Risk (LVaR) optimization of multi-asset portfolios based on vine copulas and LVaR models. This framework is applied to stock markets of the G-7 countries, gold, commodities and Bitcoin. The results show that our approach is superior to the classical mean–variance Markowitz portfolio technique in terms of the optimal portfolio selection under a number of realistic operational and budget constraints. We find that both Bitcoin and gold improves the risk-return performance of the G-7 stock portfolio. However, Bitcoin (gold) performs better under a scenario of only long-positions (when short-selling is allowed).
year | journal | country | edition | language |
---|---|---|---|---|
2019-12-01 | Physica A: Statistical Mechanics and its Applications |