2009•ForecastingOpen access

Optimal Model of Loans Portfolio Based on CVaR Risk Measurement and VaR Control

Guotai Chi

Abstract

Using minimum CVaR of loan 's portfolio as a object function,taking VaR of loan 's portfolio as a constraint,using quadratic programming as a approach,a decision-making model of loan 's portfolio optimization is set up.The contributions of the model lie on three aspects.Firstly,probability of disaster risk for the bank is reduced while taking CVaR minimum as a object function.Secondly,portfolio risk is limited within tolerance ability of bank.Thirdly,feasible range of objective yield is determined through both efficiency frontier of minimum CVaR and maximum yield of individual loan.

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Key concepts: CVAR, Portfolio optimization, Portfolio, Loan, Post-modern portfolio theory, Mathematical optimization, Econometrics, Efficient frontier