A Closed-Form Solution for Robust Portfolio Selection with Worst-Case CVaR Risk Measure

With the uncertainty probability distribution, we establish the worst-case CVaR (WCCVaR) risk measure and discuss a robust portfolio selection problem with WCCVaR constraint. The explicit solution, instead of numerical solution, is found and two-fund separation is proved. The comparison of efficient frontier with mean-variance model is discussed and finally we give numerical comparison with VaR model and equally weighted strategy. The numerical findings indicate that the proposed WCCVaR model has relatively smaller risk and greater return and relatively higher accumulative wealth than VaR model and equally weighted strategy.