Taming Tail Risk: Regularized Multiple β Worst-Case CVaR Portfolio

The importance of proper tail risk management is a crucial component the investment process and conditional Value at Risk (CVaR) often used as measure. CVaR asymmetric measure that controls manages downside portfolio while symmetric measures such variance consider both upside risk. In fact, minimum promising alternative to traditional mean-variance optimization. However, there are three major challenges in portfolio. Firstly, when using measure, we need determine distribution asset returns, but it difficult actually grasp distribution; therefore, invest situation where uncertain. Secondly, formulated with single β may output significantly different portfolios depending on β. Finally, most allocation strategies do not account for transaction costs incurred by each rebalancing order improve these challenges, propose Regularized Multiple Worst-case (RM-WCVaR) characteristics this follows: makes robust worst-case which still an stable among multiple β, against changes weights over time. We perform experiments well-known benchmarks evaluate proposed portfolio.RM-WCVaR demonstrates superior performance having higher risk-adjusted returns lower maximum drawdown.