Portfolio Optimization with Shortfall Constraints: A Confidence-Limit Approach to Managing Downside Risk

Safety first portfolio choice based on financial and sustainability returns

“…Several studies of portfolio theory suggest other risk measures than standard deviation. In recent years safety first approaches like the ones presented in Leibowitz & Henriksson (1989), Sortino & Forsey (1996), Haley & Whiteman (2008) all of them based on the pioneering work of Telser (1955) and Roy (1952) -increasingly gain attention through the related concepts of shortfall constraints and downside risk in 3 practice.…”

Inflation-Hedging Portfolios in Different Regimes

“…Different methodologies have been developed that move away from the standard mean-variance approach, by changing the risk measure of the portfolio. One branch of the literature considers portfolio selection with value at risk (Agarwal and Naik (2004), Martellini and Ziemann (2007)), or conditional VaR (Rockafellar and Uryasev (2000)); the other branch with shortfall probability (Leibowitz and Henriksson (1989), Leibowitz and Kogelman (1991), Lucas and Klaassen (1998), Billio and Casarin (2007), Smith and Gould (2007)). A useful development of our work would be to reconcile the two approaches and examine shortfall probabilities in the context of non-normal returns.…”

“…Roy defined the shortfall constraint such that the probability of the portfolio's value falling below a specified disaster level is limited to a specified disaster probability. Portfolio optimisations with a shortfall probability risk measure have been conducted before (Leibowitz and Henriksson (1989), Leibowitz and Kogelman (1991), Lucas and Klaassen (1998), Billio (2007), Smith and Gould (2007)), but as far as we know not in the context of an inflation hedging portfolio.…”

Méthode multicritère de sélection de portefeuilles indiciels internationaux

“…Le nouveau modèle sous contraintes peut alors être résolu afin d'obtenir un portefeuille optimal [voir pour exemple Leibowitz et Henriksson, 1989]. En pratique, ces contraintes (coûts de transaction, liquidité, risque politique, risque de change, etc.)…”