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Portfolio selection with uncertain exit time: a robust CVaR approach. (English) Zbl 1181.91292
Summary: We explore the portfolio selection problem involving an uncertain time of eventual exit. To deal with this uncertainty, the worst-case CVaR methodology is adopted in the case where no or only partial information on the exit time is available, and the corresponding problems are integrated into linear programs which can be efficiently solved. Moreover, we present a method for specifying the uncertain information on the distribution of the exit time associated with exogenous and endogenous incentives. Numerical experiments with real market data and Monte Carlo simulation show the usefulness of the proposed model.
MSC:
91G10Portfolio theory
91G60Numerical methods in mathematical finance
90C05Linear programming
65C05Monte Carlo methods
Software:
SeDuMi
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