Financial Engineering Seminar
March, 19, 2004 (Fri)
3:00 PM - 3:50 PM(8th period),
Weil Hall 307
On the global minimization of the value-at-risk
The Margaret A. Darrin Distinguished Professor in Applied Mathematics
Abstract
In this paper, we consider the nonconvex minimization
problem of the value-at-risk (VaR) that arises from financial risk analysis.
By considering this problem as a special linear program with linear
complementarity constraints (a bilevel linear program to be more
precise), we develop upper and lower bounds for the minimum VaR
and show how the combined bounding procedures can be used to
compute the latter value to global optimality. A numerical example
is provided to illustrate the methodology.