CVaR ERC PORTFOLIO OPTIMIZATION

marco

2016 11 11

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Dear all, I'm trying to solve an optimization problem concerning ERC portfolio. I have N assets in portfolio and I'm looking for a portfolio in which the risk contributions in terms of CVaR are equal among all assets. I use the code provided by Prof. Dr. Markus Leippold in his home page(<http://www.leippold.ch/matlab.html)>. This code works fine and it gives the right solution for ERC portfolio using volatility as risk measure, but using CVaR as risk measure it doesn't work. I calculated the CVaR as follow:

if true
  [T,K]=size(returns);
Conf_lev = 0.05;
idx=floor(Conf_lev*T);
V  = zeros(K,1);
CV = zeros(K,1);
sx = sort(returns);
V  = sx(idx,:);
CV = mean(sx(1:idx,:));
end