Portfolio choice problem with the Value-at-Risk utility function under general linear constraints

  • Taras Zabolotskyy Lviv Institute of Banking
  • Taras Bodnar Humboldt University of Berlin
  • Valdemar Vitlinskyy Kyiv National Economic University named after Vadym Hetman


Purpose and subject of researchThe paper is devoted to the problem on constructing an optimal portfolio with the highest expected utility in which to evaluate the risk of the portfolio is accepted VaR. In contrast to the classical method of constructing the portfolio with the expected use of quadratic utility, considered approach was not considered in scientific studies, since the use of VaR as a tool to calculate the risk of the portfolio and its construction is quite new.Research methodologyThe study is expected utility function of assigned based on Value-at-Risk and its application to the problem of rational choice structure of the portfolio.Value resultsUsing the described method of constructing an optimal portfolio, particularly in banking is fully consistent with the recommendations of the Basel Committee. Using this method will allow banks to conduct transactions on the stock market under the Basel and, in addition, provided literacy restrictions, consider all the rules and limitations prescribed by law.ConclusionsThe paper considers a generalized and solved the problem of portfolio optimization where classical optimization condition (the sum of the portfolio weights are 1) is replaced by linear restrictions on weights.

Author Biographies

Taras Zabolotskyy, Lviv Institute of Banking
Candidate of Economic Sciences,Lviv Institute of Banking,Senior Researcher 
Taras Bodnar, Humboldt University of Berlin
Candidate of Physico-Mathematical SciencesHumboldt University of Berlin,Researcher 
Valdemar Vitlinskyy, Kyiv National Economic University named after Vadym Hetman
Doctor of Economic Sciences, Professor,Kyiv National Economic University named after Vadym Hetman,head of department 


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Theoretical and methodological problems of economic cybernetics