Multi-period VaR-constrained portfolio optimization with applications to the electric power sector

This paper considers the optimization of portfolios of real and contractual assets, including derivative instruments, make subordinate to a Value-at-Risk (VaR) constraint, with special emphasis upon applications in electric power. The focus is upon translating VaR definitions for a longer period of time, say a year, to decisions upon shorter periods of time, say a week or a month Thus, if a VaR constraint is imposed upon annual cash flows from a portfolio, translating this annual VaR constraint into appropriate risk management/VaR constraints for daily, weekly or monthly trades within the year must be accomplished. The paper first characterizes the multi-period