Variance Minimization

Optimal Option Portfolios for Student t Returns ArXiv ID: 2601.07991 “View on arXiv” Authors: Kyle Sung, Traian A. Pirvu Abstract We provide an explicit solution for optimal option portfolios under variance and Value at Risk (VaR) minimization when the underlying returns follow a Student t-distribution. The novelty of our paper is the departure from the traditional normal returns setting. Our main contribution is the methodology for obtaining optimal portfolios. Numerical experiments reveal that, as expected, the optimal variance and VaR portfolio compositions differ by a significant amount, suggesting that more realistic tail risk settings can lead to potentially more realistic portfolio allocations. ...

Benchmark Beating with the Increasing Convex Order ArXiv ID: 2311.01692 “View on arXiv” Authors: Unknown Abstract In this paper we model benchmark beating with the increasing convex order (ICX order). The mean constraint in the mean-variance theory of portfolio selection can be regarded as beating a constant. We then investigate the problem of minimizing the variance of a portfolio with ICX order constraints, based on which we also study the problem of beating-performance-variance efficient portfolios. The optimal and efficient portfolios are all worked out in closed form for complete markets. ...