Robust Profit Opportunities in Risky Financial Portfolios
Mustafa C. Pinar (mustafapBilkent.EDU.TR)
Abstract: For risky financial securities with given expected return vector and covariance matrix, we propose the concept of a robust profit opportunity in single and multiple period settings. We show that the problem of finding the ``most robust'' profit opportunity can be solved as a convex quadratic programming problem, and investigate its relation to the Sharpe ratio.
Keywords: arbitrage, Sharpe ratio, robust optimization
Category 1: Applications -- OR and Management Sciences (Finance and Economics )
Category 2: Robust Optimization
Citation: Technical Report, Department of Mathematical Sciences, Carnegie Mellon University, Pittsburgh, PA 15213, USA, August 2004.
Entry Submitted: 08/17/2004
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