Abstract
We consider a portfolio optimization problem of the Black–Litterman type, in which we use the conditional value-at-risk (CVaR) as the risk measure and we use the multi-variate elliptical distributions, instead of the multi-variate normal distribution, to model the financial asset returns. We propose an approximation algorithm and establish the convergence results. Based on the approximation algorithm, we derive a closed-form solution of the portfolio optimization problems of the Black–Litterman type with CVaR.
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