Optimal multivariate financial decision making

Bernard，C.1,2; De Gennaro Aquino，L.3,4; Vanduffel，S.2

2022

10.1016/j.ejor.2022.09.017

EUROPEAN JOURNAL OF OPERATIONAL RESEARCH   Impact Factor & Quartile

0377-2217

Agents who pursue optimal portfolio choice by optimizing a univariate objective (e.g., an expected utility) obtain optimal payoffs that are increasing with each other (situation of no diversification). This situation may lead to an undesirable level of systemic risk for society. A regulator may consider a global perspective and aim to enforce diversification among the various portfolios by optimizing a suitable multivariate objective. We explain that optimal solutions satisfy a notion of multivariate cost-efficiency and provide an algorithm to obtain multivariate cost-efficient payoffs. We also assess the cost of diversification and provide the strategy that the regulator should pursue for obtaining the desired level of diversification.

Cost-efficiency Decision analysis Diversification Multivariate preferences Systemic risk

English

Others

ENGINEERING

2-s2.0-85139734758

Scopus

1.Department of Accounting,Law and Finance,Grenoble Ecole de Management,France
2.Faculty of Economics,Vrije Universiteit Brussel,Belgium
3.Department of Information Systems and Management Engineering,College of Business,Southern University of Science and Technology (SUSTech),Shenzhen,China
4.Department of Mathematical Sciences,University of Copenhagen,Denmark

Bernard，C.,De Gennaro Aquino，L.,Vanduffel，S.. Optimal multivariate financial decision making[J]. EUROPEAN JOURNAL OF OPERATIONAL RESEARCH,2022,307(1):468-483.

Bernard，C.,De Gennaro Aquino，L.,&Vanduffel，S..(2022).Optimal multivariate financial decision making.EUROPEAN JOURNAL OF OPERATIONAL RESEARCH,307(1),468-483.

Bernard，C.,et al."Optimal multivariate financial decision making".EUROPEAN JOURNAL OF OPERATIONAL RESEARCH 307.1(2022):468-483.