Prospect theory postulates that the utility function is characterized by a kink (a point of non-differentiability) that distinguishes gains from losses. In this paper we present an algorithm that efficiently solves the linear version of the kinked-utility problem. First, we transform the...

For a general Markowitz portfolio selection problem with linear inequality constraints, it is not possible to obtain a closed form solution. The number of parametric intervals and corresponding segments of the efficient frontier is not known a priori. In this paper, we analyze the structure of...

Credit risk management is important for the investors in practical risk management. This paper aims to discuss how to evaluate the default risk of bond portfolios by applying extreme value theory. Based on Black and Cox default approach, we propose a novel threshold default model and use extreme...