The Research Of CDaR-based Efficient Frontier

Financial risks management is a hot topic in financial instituations, academic, and financial supervisors for recent years. Risks measurement is the core of effective risks management. Therefore, it is significantly important to study risks measurement in the background of financial globalization. Reasonable risks measurement is fundamental for China's risk management study, as well as China's finance development and financial markets construction.The main topic of this article is"The Research of CDaR-based efficient frontier". Firstly, we explain the reason why we chose this thesis and the background of it. Secondly, we discuss some very important theory about risk measurement and management ,such as Mean-Variance(MV)model, Mean-Value-at-risk(VaR)model, Mean-Conditional Value-at -risk(CVaR) model and Mean-Conditional Drawdown-at-risk(CDaR) model .The emphasis of this article is Mean-CDaR model: we adopted an optimizing arithmetic method advanced by R.T.Rockafellar and S.Uryasev. Then we are able to construct an optimizing model which made use of conditional drawdown-at-risk to measure the financial risks. Empiricially, we constitute a portfolio of 10 significant stocks in Chinese stock market. And by use of the famous calculating software-Matlab, we optimize the portfolio, and got the efficient frontier. Besides,we can also determine the share of the every piece of stock. Finally, we give out the comparing analysis for the frontier we have got ,breadthways and lengthways. Then we can conclude that the optimizing model based on CDaR is superior and more suitable than the model on other risk measurement.