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Global OrderValue Optimization by means of a multistart harmonic oscillator tunneling strategy
 

Summary: Global Order­Value Optimization by means of a
multistart harmonic oscillator tunneling strategy
R. Andreani # J. M. Mart’nez + M. Salvatierra # F. Yano §
July 15, 2004
Abstract
The OVO (Order­Value Optimization) problem consists in the min­
imization of the order­value function f(x), defined by
f(x) = f i p (x) (x),
where
f i 1 (x) (x) # . . . # f i m (x) (x).
The functions f 1 , . . . , f m are defined
on# # IR n and p is an integer
between 1 and m.
When x is a vector of portfolio positions and f i (x) is the predicted
loss under the scenario i, the order­value function is the discrete Value­
at­Risk (VaR) function, which is largely used in risk evaluations.
The OVO problem is continuous but nonsmooth and, usually, has
many local minimizers. A local method with guaranteed convergence
# Department of Applied Mathematics, IMECC­UNICAMP, University of Campinas,
CP 6065, 13081­970 Campinas SP, Brazil. This author was supported by PRONEX­

  

Source: Andreani, Roberto - Instituto de Matemática, Estatística e Computação Científica, Universidade Estadual de Campinas

 

Collections: Mathematics