Distortion Risk Measures in Portfolio Optimization

  • Ekaterina N. Sereda
  • Efim M. Bronshtein
  • Svetozar T. Rachev
  • Frank J. Fabozzi
  • Wei Sun
  • Stoyan V. Stoyanov


Distortion risk measures are perspective risk measures because they allow an asset manager to reflect a client’s attitude toward risk by choosing the appropriate distortion function. In this paper, the idea of asymmetry was applied to the standard construction of distortion risk measures. The new asymmetric distortion risk measures are derived based on the quadratic distortion function with different risk-averse parameters.


Risk Measure Portfolio Optimization Stochastic Dominance Distortion Function Coherent Risk Measure 
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© Springer Science+Business Media, LLC 2010

Authors and Affiliations

  • Ekaterina N. Sereda
    • 1
  • Efim M. Bronshtein
    • 2
  • Svetozar T. Rachev
    • 3
  • Frank J. Fabozzi
    • 5
  • Wei Sun
    • 6
  • Stoyan V. Stoyanov
    • 4
  1. 1.HECTOR School of Engineering and ManagementUniversity of KarlsruheKarlsruheGermany
  2. 2.Ufa State Aviation Technical UniversityUfaRussian Federation
  3. 3.University of Karlsruhe, KIT, University of California at Santa Barbara, and FinAnalytica Inc.KarlsruheGermany
  4. 4.FinAnalytica Inc.SeattleUSA
  5. 5.Yale School of ManagementNew HavenUSA
  6. 6.School of Economics and Business Engineering, University of KarlsruheKarlsruheGermany

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