Since the Markowitz mean-variance framework of 1952 and the subsequent discoveries of the CAPM and the APT, finance researchers have always strived to produce a reference performance measure adjusted for risk. With such a measure, any supplemental return would be denominated as “alpha”. But...

The problem we address here is the replication of a bond benchmark when only a fraction of the portfolio is invested for the replication. Our methodology is based on a minimization of the tracking error subject to a set of constraints, namely (1) the fraction invested for the replication, (2) a...

This paper proposes a Stochastic Programming (SP) approach for the calculation of the liquidity-adjusted Value-at-Risk (LVaR). The model presented in this paper offers an alternative to Almgren and Chriss’s mean-variance approach (1999 and 2000). In this research, a two-stage stochastic...