Dynamic mean semi-variance portfolio selection

Ali Lari-Lavassani, Xun Li

Research output: Journal article publicationJournal articleAcademic researchpeer-review

4 Citations (Scopus)


In real investment situations, one desires to only minimize downside risk or portfolio loss without affecting the upside potentials. This can be accomplished by mean semi-variance optimization but not by mean variance. In the Black-Scholes setting, this paper proposes for the very practical yet intractable dynamic mean semi-variance portfolio optimization problem, an almost analytical solution. It proceeds by reducing the multi-dimensional portfolio selection problem to a one-dimensional optimization problem, which is then expressed in terms of the normal density, leading to a very simple and efficient numerical algorithm. A numerical comparison of the efficient frontier for the mean variance and semi-variance portfolio optimization problem is presented.
Original languageEnglish
Pages (from-to)95-104
Number of pages10
JournalLecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics)
Publication statusPublished - 1 Dec 2003
Externally publishedYes

ASJC Scopus subject areas

  • Theoretical Computer Science
  • Computer Science(all)


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