WCVaR Robust Portfolio Model With GARCH-EVT-Copula

The mean variance model,which has been widely applied in the field of asset allocation,has laid the foundation for the development of modern quantitative finance.However,due to the uncertainty of financial system and the complexity of financial decision-making environment,the traditional portfolio selection model is very sensitive to parameter estimation.For the robustness of the model,a robust portfolio model is established under the assumption that the underlying joint distribution of multiple financial assets return is mixed and uncertain.The key to build a robust model is the effective description of an uncertain set.Firstly,we use the GARCH-EVT model to describe the fat tail and heteroscedasticity characteristics of single financial asset return.Then we use Copula to describe the dependence structure between the yields,and establish the GARCH-EVT-Copula model.Finally,a mixture of uncertain multivariate distributions of returns is constructed using different Copula functions,and a robust portfolio model of GARCH-EVT-Copula-WCVaR is established on the basis of WCVaR-Copula robust model.Compared to the Normal-Copula-WCVaR robust model and the classical mean variance model in the experimental study,the return of GARCH-EVT-Copula-WCVaR robust model is higher than that of Normal-Copula-WCVaR robust model and mean variance model during the stock market crisis and the period when the volatility of return fluctuates.