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Portfolio Management With Drawdown Constraint
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Book Synopsis Portfolio Management with Drawdown Constraint by : Maxime Bonelli
Download or read book Portfolio Management with Drawdown Constraint written by Maxime Bonelli and published by . This book was released on 2017 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze optimal investment strategies under the drawdown constraint that the wealth process never falls below a fixed fraction of its running maximum. We derive optimal allocation programs by solving numerically the Hamilton-Jacobi-Bellman equation that characterizes the finite horizon expected utility maximization problem, for investors with power utility as well as S-shaped utility. Using stochastic simulations, we find that, according to utility maximization, implementing the drawdown constraint can be gainful in optimal portfolios for the power utility, for some market configurations and investment horizons. However, our study reveals that the optimal strategy with drawdown constraint is not the preferred investment for the S-shaped utility investor, who rather prefers the equivalent optimal strategy without constraint. Indeed, the latter investment being similar to a partial portfolio insurance, the additional drawdown constraint does not appear valuable for this investor in optimal portfolios.
Book Synopsis Portfolio Selection With a Drawdown Constraint by : Gordon J. Alexander
Download or read book Portfolio Selection With a Drawdown Constraint written by Gordon J. Alexander and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: When identifying optimal portfolios, practitioners often impose a drawdown constraint. This constraint is even explicit in some money management contracts such as the one recently involving Merrill Lynch' management of Unilever's pension fund. In this setting, we provide a characterization of optimal portfolios using mean-variance analysis. In the absence of a benchmark, we find that while the constraint typically decreases the optimal portfolio's standard deviation, the constrained optimal portfolio can be notably mean-variance inefficient. In the presence of a benchmark such as in the Merrill Lynch-Unilever contract, we find that the constraint increases the optimal portfolio's standard deviation and tracking error volatility. Thus, the constraint negatively affects a portfolio manager's ability to track a benchmark.
Book Synopsis Supply Chain and Finance by : Panos M. Pardalos
Download or read book Supply Chain and Finance written by Panos M. Pardalos and published by World Scientific. This book was released on 2004 with total page 359 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book describes recently developed mathematical models, methodologies, and case studies in diverse areas, including stock market analysis, portfolio optimization, classification techniques in economics, supply chain optimization, development of e-commerce applications, etc. It will be of interest to both theoreticians and practitioners working in economics and finance.
Book Synopsis Drawdown Controlled Optimal Portfolio Selection with Linear Constraints on Portfolio Weights by : Guangliang He
Download or read book Drawdown Controlled Optimal Portfolio Selection with Linear Constraints on Portfolio Weights written by Guangliang He and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We solve the problem of constructing an optimal portfolio consisting of many risky assets to maximize the long-term growth rate of a representative agent's expected utility, subject to a set of general linear constraints on the portfolio weight vector as well as a constraint to prevent wealth drawdowns below a dynamic floor. The dynamic floor is defined as the time-decayed historical all-time high. Our results generalize those achieved by earlier authors, including Grossman and Zhou (1993) and Cvitannic and Karatzas (1994). Grossman and Zhou solved a special case of our problem by focusing on a single risky asset without portfolio weight constraints. Cvitanic and Karatzas solved a problem involving many risky assets but that ignored portfolio weight constraints and the time decay on the dynamic floor. To illustrate the usefulness of our method, we present several numerical examples based on both actual and simulated (Monte Carlo) returns. Finally, we suggest applications of our results to various practical investment management problems, including the management of hedge fund portfolios and 'principal-protected' investment strategies.
Book Synopsis Portfolio Optimization with Drawdown Constraints by : Alexei Valerievich Chekhlov
Download or read book Portfolio Optimization with Drawdown Constraints written by Alexei Valerievich Chekhlov and published by . This book was released on 2000 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Efficient Asset Management by : Richard O. Michaud
Download or read book Efficient Asset Management written by Richard O. Michaud and published by Oxford University Press. This book was released on 2008-03-03 with total page 207 pages. Available in PDF, EPUB and Kindle. Book excerpt: In spite of theoretical benefits, Markowitz mean-variance (MV) optimized portfolios often fail to meet practical investment goals of marketability, usability, and performance, prompting many investors to seek simpler alternatives. Financial experts Richard and Robert Michaud demonstrate that the limitations of MV optimization are not the result of conceptual flaws in Markowitz theory but unrealistic representation of investment information. What is missing is a realistic treatment of estimation error in the optimization and rebalancing process. The text provides a non-technical review of classical Markowitz optimization and traditional objections. The authors demonstrate that in practice the single most important limitation of MV optimization is oversensitivity to estimation error. Portfolio optimization requires a modern statistical perspective. Efficient Asset Management, Second Edition uses Monte Carlo resampling to address information uncertainty and define Resampled Efficiency (RE) technology. RE optimized portfolios represent a new definition of portfolio optimality that is more investment intuitive, robust, and provably investment effective. RE rebalancing provides the first rigorous portfolio trading, monitoring, and asset importance rules, avoiding widespread ad hoc methods in current practice. The Second Edition resolves several open issues and misunderstandings that have emerged since the original edition. The new edition includes new proofs of effectiveness, substantial revisions of statistical estimation, extensive discussion of long-short optimization, and new tools for dealing with estimation error in applications and enhancing computational efficiency. RE optimization is shown to be a Bayesian-based generalization and enhancement of Markowitz's solution. RE technology corrects many current practices that may adversely impact the investment value of trillions of dollars under current asset management. RE optimization technology may also be useful in other financial optimizations and more generally in multivariate estimation contexts of information uncertainty with Bayesian linear constraints. Michaud and Michaud's new book includes numerous additional proposals to enhance investment value including Stein and Bayesian methods for improved input estimation, the use of portfolio priors, and an economic perspective for asset-liability optimization. Applications include investment policy, asset allocation, and equity portfolio optimization. A simple global asset allocation problem illustrates portfolio optimization techniques. A final chapter includes practical advice for avoiding simple portfolio design errors. With its important implications for investment practice, Efficient Asset Management 's highly intuitive yet rigorous approach to defining optimal portfolios will appeal to investment management executives, consultants, brokers, and anyone seeking to stay abreast of current investment technology. Through practical examples and illustrations, Michaud and Michaud update the practice of optimization for modern investment management.
Book Synopsis The Leverage Space Trading Model by : Ralph Vince
Download or read book The Leverage Space Trading Model written by Ralph Vince and published by John Wiley and Sons. This book was released on 2009-05-13 with total page 213 pages. Available in PDF, EPUB and Kindle. Book excerpt: The cornerstone of money management and portfolio optimization techniques has remained the same throughout history: maximize gains and minimize risk. Yet, asserts Ralph Vince, the widely accepted approaches of combining assets into a portfolio and determining their relative quantities are wrong and will cost you. They illuminate nothing, he says, aside from providing the illusion of safety through diversification. Although numerous Nobel Prizes have been awarded based on some of those widely accepted principles, their popular acceptance does not constitute real-world validation. What has been needed is a viable alternative to directly address these real-world dictates. In The Leverage Space Trading Model, Vince offers a groundbreaking contribution to the literature that builds on a lifetime of expert analysis to deliver not only a superior new portfolio model, but takes the entire discipline of portfolio management to a new level. In this book, Vince who has made many important intellectual contributions to the field for over two decades departs radically from informed orthodoxy to present an entirely new approach to portfolio management. At its core, The Leverage Space Trading Model basically tells how resources should be combined to maximize safety and profitability given the dictates of the real world. But, as the author points out, given the complex and seemingly pathological character of human desires, we are presented with a fascinating puzzle. Research has found that human beings do not primarily want to maximize gains our psychological makeup is such that we instead tend to possess seemingly more complex desires. If the models don't work, if we are ultimately unable to satisfy our more complex desires, what's the alternative? As Vince shows, the answer is to utilize the Leverage Space Model as a "framework" to achieve the specific ends a trader or portfolio manager seeks. The author's new allocation paradigm avoids the troubles that come with mean variance models which most models are and quantifies drawdowns to achieve a growth-optimal portfolio within a given drawdown constraint, in a manner that satisfies these seemingly pathological human desires. And for those who don't wish to get involved with the mathematics, Vince has presented the text in a manner of two congruent, simultaneous channels, with math and without. Most simply put, this book will change how you think about money management and portfolio allocations.
Book Synopsis Modern Portfolio Management by : Martin L. Leibowitz
Download or read book Modern Portfolio Management written by Martin L. Leibowitz and published by John Wiley & Sons. This book was released on 2009-01-08 with total page 504 pages. Available in PDF, EPUB and Kindle. Book excerpt: Active 130/30 Extensions is the newest wave of disciplined investment strategies that involves asymmetric decision-making on long/short portfolio decisions, concentrated investment risk-taking in contrast to diversification, systematic portfolio risk management, and flexibility in portfolio design. This strategy is the building block for a number of 130/30 and 120/20 investment strategies offered to institutional and sophisticated high net worth individual investors who want to manage their portfolios actively and aggressively to outperform the market.
Author :University of Minnesota. Institute for Mathematics and Its Applications Publisher : ISBN 13 : Total Pages :12 pages Book Rating :4.:/5 (123 download)
Book Synopsis On Portfolio Optimization Under "drawdown" Constraints by : University of Minnesota. Institute for Mathematics and Its Applications
Download or read book On Portfolio Optimization Under "drawdown" Constraints written by University of Minnesota. Institute for Mathematics and Its Applications and published by . This book was released on 1994 with total page 12 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Advanced Portfolio Management by : Giuseppe A. Paleologo
Download or read book Advanced Portfolio Management written by Giuseppe A. Paleologo and published by John Wiley & Sons. This book was released on 2021-08-10 with total page 215 pages. Available in PDF, EPUB and Kindle. Book excerpt: You have great investment ideas. If you turn them into highly profitable portfolios, this book is for you. Advanced Portfolio Management: A Quant’s Guide for Fundamental Investors is for fundamental equity analysts and portfolio managers, present, and future. Whatever stage you are at in your career, you have valuable investment ideas but always need knowledge to turn them into money. This book will introduce you to a framework for portfolio construction and risk management that is grounded in sound theory and tested by successful fundamental portfolio managers. The emphasis is on theory relevant to fundamental portfolio managers that works in practice, enabling you to convert ideas into a strategy portfolio that is both profitable and resilient. Intuition always comes first, and this book helps to lay out simple but effective "rules of thumb" that require little effort to implement and understand. At the same time, the book shows how to implement sophisticated techniques in order to meet the challenges a successful investor faces as his or her strategy grows in size and complexity. Advanced Portfolio Management also contains more advanced material and a quantitative appendix, which benefit quantitative researchers who are members of fundamental teams. You will learn how to: Separate stock-specific return drivers from the investment environment’s return drivers Understand current investment themes Size your cash positions based on Your investment ideas Understand your performance Measure and decompose risk Hedge the risk you don’t want Use diversification to your advantage Manage losses and control tail risk Set your leverage Author Giuseppe A. Paleologo has consulted, collaborated, taught, and drank strong wine with some of the best stock-pickers in the world; he has traded tens of billions of dollars hedging and optimizing their books and has helped them navigate through big drawdowns and even bigger recoveries. Whether or not you have access to risk models or advanced mathematical background, you will benefit from the techniques and the insights contained in the book—and won't find them covered anywhere else.
Book Synopsis Portfolio Optimization with Drawdown Constraints by : Alexei Valerievich Chekhlov
Download or read book Portfolio Optimization with Drawdown Constraints written by Alexei Valerievich Chekhlov and published by . This book was released on 2000 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Drawdown Constraints and Portfolio Optimization by : Marcus Davidsson
Download or read book Drawdown Constraints and Portfolio Optimization written by Marcus Davidsson and published by . This book was released on 2013 with total page 13 pages. Available in PDF, EPUB and Kindle. Book excerpt: The seminal work by Markowitz in 1959 introduced portfolio theory to the world. The prevailing notion since then has been that portfolio risk is non linear i.e. you cannot use Linear Programming (LP) to optimize your portfolio. We will in this paper show that simple portfolio drawdown constraints are indeed linear and can be used to find for example maximum risk adjusted return portfolios. VaR for these portfolios can then be estimated directly instead of using computer intensive Monte Carlo methods.
Book Synopsis Portfolio Benchmarking Under Drawdown Constraint and Stochastic Sharpe Ratio by : Ankush Agarwal
Download or read book Portfolio Benchmarking Under Drawdown Constraint and Stochastic Sharpe Ratio written by Ankush Agarwal and published by . This book was released on 2016 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider an investor who seeks to maximize her expected utility derived from her terminal wealth relative to the maximum performance achieved over a fixed time horizon, and under a portfolio drawdown constraint, in a market with local stochastic volatility (LSV). In the absence of closed-form formulas for the value function and optimal portfolio strategy, we obtain approximations for these quantities through the use of a coefficient expansion technique and nonlinear transformations. We utilize regularity properties of the risk tolerance function to numerically compute the estimates for our approximations. In order to achieve similar value functions, we illustrate that, compared to a constant volatility model, the investor must deploy a quite different portfolio strategy which depends on the current level of volatility in the stochastic volatility model.
Book Synopsis Multi-Asset Investing by : Pranay Gupta
Download or read book Multi-Asset Investing written by Pranay Gupta and published by John Wiley & Sons. This book was released on 2016-05-16 with total page 309 pages. Available in PDF, EPUB and Kindle. Book excerpt: Despite the accepted fact that a substantial part of the risk and return of any portfolio comes from asset allocation, we find today that the majority of investment professionals worldwide are focused on security selection. Multi-Asset Investing: A Practitioner’s Framework questions this basic structure of the investment process and investment industry. Who says we have to separate alpha and beta? Are the traditional definitions for risk and risk premium relevant in a multi-asset class world? Do portfolios cater for the ‘real risks’ in their investment processes? Does the whole Emerging Markets demarcation make sense for investing? Why do active Asian managers perform much poorer compared to developed market managers? Can you distinguish how much of a strategy’s performance comes from skill rather than luck? Does having a performance fee for your manager create alignment or misalignment? Why is the asset management transitioning from multi-asset strategies to multi-asset solutions? These and many other questions are asked, and suggestions provided as potential solutions. Having worked together for fifteen years, the authors’ present implementable solutions which have helped them successfully manage large asset pools. The Academic Perspective “Multi-Asset Investing asks fundamental questions about the asset allocation investment processes in use today, and can have a substantial impact on the future structure of the finance industry. It clarifies and distils the techniques that investment professionals need to master to add value to client portfolios.” —Paul Smith, President & CEO, CFA Institute “Pranay Gupta, Sven Skallsjo, and Bing Li describe the essential concepts and applications of multi-asset investing. Their treatment is far ranging and exceptionally lucid, and always with a nod to practical application. Buy this book and keep it close at hand.” —Mark Kritzman, MIT Sloane School of Management “Innovative solutions to some of the most difficult investment problems we are faced with today. Multi-asset Investing tackles investment issues which don’t have straight forward solutions, but nevertheless are faced by every investment professional. This book sets the standard for investment processes of all asset managers.” —SP Kothari, MIT Sloane School of Management The Asset Owner Perspective “Multi-asset means different things to different people. This is the first text that details a comprehensive framework for managing any kind of multi-asset investment problem. Further, its explanation of the commercial aspects of managing a multi-asset investment business for an asset manager, private bank or asset owner make it an indispensable tool” —Sadayuki Horie, Dy. Chairman - Investment Advisory Comm., Government Pension Investment Fund, Japan “Multi-Asset Investing shows the substantial scope there is to innovate the asset allocation process. With its novel approaches to allocation, portfolio construction and risk management it demonstrates the substantial value that can be added to any portfolio. The solutions proposed by Multi-Asset Investing are creative, thought provoking, and may well be the way all portfolios need to be managed in the future.” —Mario Therrien, Senior Vice President, Caisse de Depot et Placement du Quebec, Canada The Asset Manager’s Perspective “Never has astute asset allocation and diversification been more crucial than today. Asset Managers which are able to innovate their investment processes and products in this area, are more likely to be the winners. Multi-Asset Investing provides both simple and sophisticated, tested and implementable techniques for successfully managing multi-asset portfolios.” —Vincent Camerlynck, former CEO BNP Paribas Investment Partners, Asia Pacific The Investment Strategist Perspective “For plan sponsors, portfolio managers, analysts and risk managers, Multi-Asset Investing is an unparalleled guide for portfolio management. Its approach to blending the quantitative and fundamental, top-down and bottom up and the risk and return frameworks makes it a valuable tool for any kind of investment professional. It clarifies a complex subject into a series of practical ideas to help add value to any portfolio.” —Ajay S. Kapur, Chief Strategist, BOA Merrill Lynch Asia
Book Synopsis Portfolio Management in Practice, Volume 1 by : CFA Institute
Download or read book Portfolio Management in Practice, Volume 1 written by CFA Institute and published by John Wiley & Sons. This book was released on 2020-11-24 with total page 1335 pages. Available in PDF, EPUB and Kindle. Book excerpt: Portfolio Management in Practice, Volume 1: Investment Management delivers a comprehensive overview of investment management for students and industry professionals. As the first volume in the CFA Institute’s new Portfolio Management in Practice series, Investment Management offers professionals looking to enhance their skillsets and students building foundational knowledge an essential understanding of key investment management concepts. Designed to be an accessible resource for a wide range of learners, this volume explores the full portfolio management process. Inside, readers will find detailed coverage of: Forming capital market expectations Principles of the asset allocation process Determining investment strategies within each asset class Integrating considerations specific to high net worth individuals or institutions into chosen strategies And more To apply the concepts outlined in the Investment Management volume, explore the accompanying Portfolio Management in Practice, Volume 1: Investment Management Workbook. The perfect companion resource, this workbook aligns chapter-by-chapter with Investment Management for easy referencing so readers can draw connections between theoretical content and challenging practice problems. Featuring contributions from the CFA Institute’s subject matter experts, Portfolio Management in Practice, Volume 1: Investment Management distills the knowledge forward-thinking professionals will need to succeed in today’s fast-paced financial world.
Book Synopsis Portfolio Management in Practice, Volume 2 by : CFA Institute
Download or read book Portfolio Management in Practice, Volume 2 written by CFA Institute and published by John Wiley & Sons. This book was released on 2020-01-11 with total page 640 pages. Available in PDF, EPUB and Kindle. Book excerpt: Discover the latest essential resource on asset allocation for students and investment professionals. Part of the CFA Institute’s three-volume Portfolio Management in Practice series, Asset Allocation offers a deep, comprehensive treatment of the asset allocation process and the underlying theories and markets that support it. As the second volume in the series, Asset Allocation meets the needs of both graduate-level students focused on finance and industry professionals looking to become more dynamic investors. Filled with the insights and industry knowledge of the CFA Institute’s subject matter experts, Asset Allocation effectively blends theory and practice while helping the reader expand their skillsets in key areas of interest. This volume provides complete coverage on the following topics: Setting capital market expectations to support the asset allocation process Principles and processes in the asset allocation process, including handling ESG-integration and client-specific constraints Allocation beyond the traditional asset classes to include allocation to alternative investments The role of exchange-traded funds can play in implementing investment strategies An integrative case study in portfolio management involving a university endowment To further enhance your understanding of tools and techniques explored in Asset Allocation, don’t forget to pick up the Portfolio Management in Practice, Volume 2: Asset Allocation Workbook. The workbook is the perfect companion resource containing learning outcomes, summary overview sections, and challenging practice questions that align chapter-by-chapter with the main text.
Book Synopsis On Portfolio Optimisation Under Drawdown and Floor Type Constraints by : Vladimir Cherny
Download or read book On Portfolio Optimisation Under Drawdown and Floor Type Constraints written by Vladimir Cherny and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
