What is the “value” of value-at-risk in a simulated portfolio decision-making game?

Steinbacher, Matjaz (2009): What is the “value” of value-at-risk in a simulated portfolio decision-making game?

Abstract

In the paper, I simulate the social network games of a portfolio selection where agents consider VaR when managing their portfolios. Such agents behave quite differently from the agents considering only the expected returns of the alternatives that are available to them in time. The level of omniscience of agents and the presence of liquidity agents are demonstrated to be significant factors for the portfolio management.

• Item Type: MPRA Paper
• Language: English
• Keywords: social networks; portfolio decision-making; stochastic finance; Value-at-Risk
• Subjects: G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill; Z - Other Special Topics > Z1 - Cultural Economics ; Economic Sociology ; Economic Anthropology > Z13 - Economic Sociology ; Economic Anthropology ; Social and Economic Stratification; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C73 - Stochastic and Dynamic Games ; Evolutionary Games ; Repeated Games

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