On the Global Minimization of the Value-at-Risk

Details On the Global Minimization of the Value-at-Risk On the Global Minimization of the Value-at-Risk

2004-01-07

arxiv.org/abs/math/0401063v1

Mathematics

Optimization and Control

21 pages, 1 figure

Scientific paper

In this paper, we consider the nonconvex minimization problem of the value-at-risk (VaR) that arises from financial risk analysis. By considering this problem as a special linear program with linear complementarity constraints (a bilevel linear program to be more precise), we develop upper and lower bounds for the minimum VaR and show how the combined bounding procedures can be used to compute the latter value to global optimality. A numerical example is provided to illustrate the methodology.

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