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On Portfolio Optimization Forecasting Covariances And Choosing The Risk Model
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Book Synopsis On portfolio optimization : forecasting covariances and choosing the risk model by : Louis K. C. Chan
Download or read book On portfolio optimization : forecasting covariances and choosing the risk model written by Louis K. C. Chan and published by . This book was released on 1999 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: We evaluate the performance of different models for the covariance structure of stock returns, focusing on their use for optimal portfolio selection. Comparisons are based on forecasts of future covariances as well as the out-of-sample volatility of optimized portfolios from each model. A few factors capture the general covariance structure but adding more factors does not improve forecast power. Portfolio optimization helps for risk control, but the different covariance models yield similar results. Using a tracking error volatility criterion, larger differences appear, with particularly favorable results for a heuristic approach based on matching the benchmark's attributes.
Book Synopsis On Portfolio Optimization by : Louis K.C. Chan
Download or read book On Portfolio Optimization written by Louis K.C. Chan and published by . This book was released on 2010 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: We evaluate the performance of different models for the covariance structure of stock returns, focusing on their use for optimal portfolio selection. Comparisons are based on forecasts of future covariances as well as the out-of-sample volatility of optimized portfolios from each model. A few factors capture the general covariance structure but adding more factors does not improve forecast power. Portfolio optimization helps for risk control, but the different covariance models yield similar results. Using a tracking error volatility criterion, larger differences appear, with particularly favorable results for a heuristic approach based on matching the benchmark's attributes.
Book Synopsis Advances in Portfolio Construction and Implementation by : Alan Scowcroft
Download or read book Advances in Portfolio Construction and Implementation written by Alan Scowcroft and published by Elsevier. This book was released on 2003-06-25 with total page 384 pages. Available in PDF, EPUB and Kindle. Book excerpt: Modern Portfolio Theory explores how risk averse investors construct portfolios in order to optimize market risk against expected returns. The theory quantifies the benefits of diversification.Modern Portfolio Theory provides a broad context for understanding the interactions of systematic risk and reward. It has profoundly shaped how institutional portfolios are managed, and has motivated the use of passive investment management techniques, and the mathematics of MPT is used extensively in financial risk management.Advances in Portfolio Construction and Implementation offers practical guidance in addition to the theory, and is therefore ideal for Risk Mangers, Actuaries, Investment Managers, and Consultants worldwide. Issues are covered from a global perspective and all the recent developments of financial risk management are presented. Although not designed as an academic text, it should be useful to graduate students in finance. *Provides practical guidance on financial risk management*Covers the latest developments in investment portfolio construction*Full coverage of the latest cutting edge research on measuring portfolio risk, alternatives to mean variance analysis, expected returns forecasting, the construction of global portfolios and hedge portfolios (funds)
Book Synopsis Portfolio Optimization with Noisy Covariance Matrices by : Jose Menchero
Download or read book Portfolio Optimization with Noisy Covariance Matrices written by Jose Menchero and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Mean-variance optimization provides a framework for constructing portfolios that have minimum risk for a given level of expected return. The required inputs are the expected asset returns, the asset covariance matrix, and a set of investment constraints. While portfolio optimization always leads to an increase in ex ante risk-adjusted performance, there is no guarantee that this performance improvement carries over ex post. The culprit is that both the expected return forecasts and the asset covariance matrix contain estimation error. In this paper, we explore the impact of sampling error in the covariance matrix when using mean-variance optimization for portfolio construction. In particular, we show that sampling error leads to several adverse effects, such as: (a) under-forecasting of risk, (b) increased out-of-sample volatility, (c) increased leverage and turnover, and (d) inefficient allocation of the risk budget.Moreover, we introduce a new framework to explain and understand the origin of these adverse effects. We decompose the optimal portfolio into an alpha portfolio which explains expected returns, and a hedge portfolio which has zero expected return but serves to reduce portfolio risk. We show that sampling error in the asset covariance matrix leads to systematic biases in the volatility and correlation forecasts of these portfolios.We also provide a geometric interpretation showing how these biases lead to the adverse effects described above.
Book Synopsis The Use of Risk Budgets in Portfolio Optimization by : Albina Unger
Download or read book The Use of Risk Budgets in Portfolio Optimization written by Albina Unger and published by Springer. This book was released on 2014-09-10 with total page 443 pages. Available in PDF, EPUB and Kindle. Book excerpt: Risk budgeting models set risk diversification as objective in portfolio allocation and are mainly promoted from the asset management industry. Albina Unger examines the portfolios based on different risk measures in several aspects from the academic perspective (Utility, Performance, Risk, Different Market Phases, Robustness, and Factor Exposures) to investigate the use of these models for asset allocation. Beside the risk budgeting models, alternatives of risk-based investment styles are also presented and examined. The results show that equalizing the risk across the assets does not prevent losses, especially in crisis periods and the performance can mainly be explained by exposures to known asset pricing factors. Thus, the advantages of these approaches compared to known minimum risk portfolios are doubtful.
Book Synopsis Practical Fruits of Econophysics by : Hideki Takayasu
Download or read book Practical Fruits of Econophysics written by Hideki Takayasu and published by Springer Science & Business Media. This book was released on 2006-01-05 with total page 410 pages. Available in PDF, EPUB and Kindle. Book excerpt: The proceedings of the Third Nikkei Econophysics Symposium, "Business Models in the 21st Century - Risk Management and Expectations for Econophysics," held in Tokyo in November 2004, are gathered herein. Cutting-edge research on the practical application of econophysics is included, covering such topics as the predictability of markets, the analysis of rare events, the mechanism of crashes and bubbles, markets’ correlation and risk management, investment strategy, stochastic market simulations, agent-based market simulations, wealth distribution, and network structures in economics, most of which are beyond the scope of standard financial technology. New market models and financial-data analysis methods are introduced, and dynamic aspects of markets and economy are highlighted. Professionals, researchers, and students will find an invaluable resource in this first book of its kind to summarize the latest work in the field of econophysics.
Book Synopsis Portfolio Risk Analysis by : Gregory Connor
Download or read book Portfolio Risk Analysis written by Gregory Connor and published by Princeton University Press. This book was released on 2010-03-15 with total page 400 pages. Available in PDF, EPUB and Kindle. Book excerpt: Portfolio risk forecasting has been and continues to be an active research field for both academics and practitioners. Almost all institutional investment management firms use quantitative models for their portfolio forecasting, and researchers have explored models' econometric foundations, relative performance, and implications for capital market behavior and asset pricing equilibrium. Portfolio Risk Analysis provides an insightful and thorough overview of financial risk modeling, with an emphasis on practical applications, empirical reality, and historical perspective. Beginning with mean-variance analysis and the capital asset pricing model, the authors give a comprehensive and detailed account of factor models, which are the key to successful risk analysis in every economic climate. Topics range from the relative merits of fundamental, statistical, and macroeconomic models, to GARCH and other time series models, to the properties of the VIX volatility index. The book covers both mainstream and alternative asset classes, and includes in-depth treatments of model integration and evaluation. Credit and liquidity risk and the uncertainty of extreme events are examined in an intuitive and rigorous way. An extensive literature review accompanies each topic. The authors complement basic modeling techniques with references to applications, empirical studies, and advanced mathematical texts. This book is essential for financial practitioners, researchers, scholars, and students who want to understand the nature of financial markets or work toward improving them.
Book Synopsis Forecasting Covariance for Optimal Carry Trade Portfolio Allocations by : Matthew Ames
Download or read book Forecasting Covariance for Optimal Carry Trade Portfolio Allocations written by Matthew Ames and published by . This book was released on 2016 with total page 5 pages. Available in PDF, EPUB and Kindle. Book excerpt: Modelling and forecasting of asset volatility and covariance is of prime importance in the construction of portfolios. In this paper, we present a generalised multi-factor model that incorporates heteroskedasticity and dependence in the idiosyncratic error terms. We apply this model to forecasting the time-varying covariances in a basket of high interest rate and a basket of low interest rate carry trade currencies and then utilise these forecasts for portfolio optimisation. We compare traditional Markowitz portfolio optimisation to the more recently popular risk-based portfolio optimisation. Our model is shown to provide superior risk-adjusted returns for a currency carry trade strategy over the period 1999-2014.
Book Synopsis Predictions, Nonlinearities and Portfolio Choice by : Friedrich Christian Kruse
Download or read book Predictions, Nonlinearities and Portfolio Choice written by Friedrich Christian Kruse and published by BoD – Books on Demand. This book was released on 2012 with total page 222 pages. Available in PDF, EPUB and Kindle. Book excerpt: Finance researchers and asset management practitioners put a lot of effort into the question of optimal asset allocation. With this respect, a lot of research has been conducted on portfolio decision making as well as quantitative modeling and prediction models. This study brings together three fields of research, which are usually analyzed in an isolated manner in the literature: - Predictability of asset returns and their covariance matrix - Optimal portfolio decision making - Nonlinear modeling, performed by artificial neural networks, and their impact on predictions as well as optimal portfolio construction Including predictability in asset allocation is the focus of this work and it pays special attention to issues related to nonlinearities. The contribution of this study to the portfolio choice literature is twofold. First, motivated by the evidence of linear predictability, the impact of nonlinear predictions on portfolio performances is analyzed. Predictions are empirically performed for an investor who invests in equities (represented by the DAX index), bonds (represented by the REXP index) and a risk-free rate. Second, a solution to the dynamic programming problem for intertemporal portfolio choice is presented. The method is based on functional approximations of the investor's value function with artificial neural networks. The method is easily capable of handling multiple state variables. Hence, the effect of adding predictive parameters to the state space is the focus of analysis as well as the impacts of estimation biases and the view of a Bayesian investor on intertemporal portfolio choice. One important empirical result shows that residual correlation among state variables have an impact on intertemporal portfolio decision making.
Book Synopsis Portfolio Selection with Parameter and Model Uncertainty by : Lorenzo Garlappi
Download or read book Portfolio Selection with Parameter and Model Uncertainty written by Lorenzo Garlappi and published by . This book was released on 2005 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Portfolio Optimization and Performance Analysis by : Jean-Luc Prigent
Download or read book Portfolio Optimization and Performance Analysis written by Jean-Luc Prigent and published by CRC Press. This book was released on 2007-05-07 with total page 451 pages. Available in PDF, EPUB and Kindle. Book excerpt: In answer to the intense development of new financial products and the increasing complexity of portfolio management theory, Portfolio Optimization and Performance Analysis offers a solid grounding in modern portfolio theory. The book presents both standard and novel results on the axiomatics of the individual choice in an uncertain framework, cont
Book Synopsis Advanced Stochastic Models, Risk Assessment, and Portfolio Optimization by : Svetlozar T. Rachev
Download or read book Advanced Stochastic Models, Risk Assessment, and Portfolio Optimization written by Svetlozar T. Rachev and published by Wiley. This book was released on 2008-02-25 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This groundbreaking book extends traditional approaches of risk measurement and portfolio optimization by combining distributional models with risk or performance measures into one framework. Throughout these pages, the expert authors explain the fundamentals of probability metrics, outline new approaches to portfolio optimization, and discuss a variety of essential risk measures. Using numerous examples, they illustrate a range of applications to optimal portfolio choice and risk theory, as well as applications to the area of computational finance that may be useful to financial engineers.
Book Synopsis Financial Risk Modelling and Portfolio Optimization with R by : Bernhard Pfaff
Download or read book Financial Risk Modelling and Portfolio Optimization with R written by Bernhard Pfaff and published by John Wiley & Sons. This book was released on 2016-08-16 with total page 448 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial Risk Modelling and Portfolio Optimization with R, 2nd Edition Bernhard Pfaff, Invesco Global Asset Allocation, Germany A must have text for risk modelling and portfolio optimization using R. This book introduces the latest techniques advocated for measuring financial market risk and portfolio optimization, and provides a plethora of R code examples that enable the reader to replicate the results featured throughout the book. This edition has been extensively revised to include new topics on risk surfaces and probabilistic utility optimization as well as an extended introduction to R language. Financial Risk Modelling and Portfolio Optimization with R: Demonstrates techniques in modelling financial risks and applying portfolio optimization techniques as well as recent advances in the field. Introduces stylized facts, loss function and risk measures, conditional and unconditional modelling of risk; extreme value theory, generalized hyperbolic distribution, volatility modelling and concepts for capturing dependencies. Explores portfolio risk concepts and optimization with risk constraints. Is accompanied by a supporting website featuring examples and case studies in R. Includes updated list of R packages for enabling the reader to replicate the results in the book. Graduate and postgraduate students in finance, economics, risk management as well as practitioners in finance and portfolio optimization will find this book beneficial. It also serves well as an accompanying text in computer-lab classes and is therefore suitable for self-study.
Download or read book Risk Assessment written by Georg Bol and published by Springer Science & Business Media. This book was released on 2008-11-14 with total page 286 pages. Available in PDF, EPUB and Kindle. Book excerpt: New developments in assessing and managing risk are discussed in this volume. Addressing both practitioners in the banking sector and research institutions, the book provides a manifold view on the most-discussed topics in finance. Among the subjects treated are important issues such as: risk measures and allocation of risks, factor modeling, risk premia in the hedge funds industry and credit risk management. The volume provides an overview of recent developments as well as future trends in the area of risk assessment.
Book Synopsis Operations Research Proceedings 2001 by : Peter Chamoni
Download or read book Operations Research Proceedings 2001 written by Peter Chamoni and published by Springer Science & Business Media. This book was released on 2013-03-09 with total page 493 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume contains the proceedings of the 200 I International Conference on Operations Research (OR 2(01) held at the Gerhard-Mercator-University Duisburg, September 3-5,2001. OR 200 1 was organized under the auspices of the German Society of Operations Research, Gesellschaft für Operations Research (GOR e. V.). The conference and the annual general meeting were attended by 360 participants from 20 countries. The presentation of 220 papers was organized in 15 sections. According to Duisburg as hosting city for this event OR 200 1 emphasized on contributions of OR in the areas of energy, transport and traftk. The program consisted of2 plenary lectures (Reinhard Selten and Jörg Hennerkes) and 15 invited semiplenary lectures. 97 papers were submitted for publication. Following the advice of the section chairs the program committee decided to accept 59 papers for this volume. The selected manuscripts will be published also in electronic form on the W orld Wide Web at http://www.uni-duisburg.de/or200 1. We want to thank all referees and authors for delivering their final manuscript in due time. We are also grateful to the other members of the local organizing committee and especially to Stefan Krebs, Corinna Schu and David Betge for the perfect conference management. Roland Düsing, Ralph Gollmer and Steffen Stock supported us in editing the abstracts and the final version of this proceeding volume. Last but not least thanks to all the assistants and student assistants for their operations on OR 2001 in Duisburg.
Book Synopsis "PORTFOLIO AWARENESS AND ME" by : Dr. Hrishikesh J. Juikar
Download or read book "PORTFOLIO AWARENESS AND ME" written by Dr. Hrishikesh J. Juikar and published by Lulu.com. This book was released on with total page 279 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Portfolio Selection by : Harry Markowitz
Download or read book Portfolio Selection written by Harry Markowitz and published by Yale University Press. This book was released on 2008-10-01 with total page 369 pages. Available in PDF, EPUB and Kindle. Book excerpt: Embracing finance, economics, operations research, and computers, this book applies modern techniques of analysis and computation to find combinations of securities that best meet the needs of private or institutional investors.
