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Jun
28
comment Multi-asset class allocation
Therefore I'd like to keep this open a little longer to see if someone has fresh ideas or sources, and perhaps sprinkle some bounty. Depending on how the project goes, I'll post our approach. I appreciate your answer and the link to Angs book especially, I was stuck with chincarini and I'm not too happy with it.
Jun
28
comment Multi-asset class allocation
@vonjd Thanks, while your answer has some helpful points to start with, none of the answers actually answers the question of how to generate a multi-asset portfolio. An LDI-structure is about increasing the interest rate sensitivity to match (interest-sensitive) stochastic liabilities, and factor based investing is concerned with individual stocks, and mostly used in equity. While both concepts are great, I am looking to create a dynamic portfolio structure that balances equity and bonds by playing covariance against duration (and against 1/N diversification).
Jan
17
comment Where can I find US public company bankruptcy data
You're right, my mistake. Check the other one.
Jan
16
comment I have portfolio volatility for individual years, can I use them to compute portfolio volatiltiy for subperiods?
You're not mistaken, and of course you capture correlation: One asset goes down, another one goes up -> Portfolio NAV stays the same. That's correlation at work. You can actually trade effect this by selling a call on an index, while buying calls on the index' constituents. This is called dispersion trading. The variance of your portfolio is defined by its returns, and they will be the same.
Jul
25
comment Opposite of Tail-Risk Hedge (Established Vocabulary)
Thanks for your ideas so far. It seems some clarification is necessary: The focus should lie on protective puts near the money, as opposed to far out of the money, which only hedges tail risk. For now, I'm using the term "near-the-money hedge". One could also imagine other instruments, e.g. cds payer swaptions, to implement it.
Jan
27
comment How are the Hamilton–Jacobi–Bellman equations used to solve optimal control problems?
Bjoerk - Arbitrage Theory in Continuous Time describes this extensively in Chapter 19.
Sep
25
comment Can Beneish's model for detecting earnings manipulation be applied to companies in the UK?
I see no reason you shouldn't be able to apply it to any market, provided you have the data. However it is up to you to test your results; we do not provide help for developing trading strategies.
Sep
22
comment Is there a contradiciton between option prices being martingales and the use of options for speculation?
possible duplicate of How does the "risk-neutral pricing framework" work?
Jul
14
comment What is (High-Low) and (Open-Close) spread?
yeah, thats correct.
Jul
4
comment Bracket-Notation in SDEs
Thanks to all of you!
Jul
2
comment Bracket-Notation in SDEs
Well I assume it's his personal way of writing squared Brownian motions, however he never defines it. Does this notation by any convention carry additional information?
Jun
25
comment Black-Scholes fastest computation method
Can you elaborate on what data you have given and what you intend to do with it? I don't really see need for a numerical method yet, but perhaps I'm just looking from the wrong angle here...
Apr
22
comment Mean-variance minimizser
I dont see a question?
Apr
22
comment portfolio optimization with a loop
Could you clarify your question? I don't really understand your problem...
Mar
29
comment Portfolio risk-return when assets have limited and inconsistent historical data / time series?
Yes, you are absolutely right. This method works only for assets with very similar sources of risk, and if unsystematic factors can be considered negligible. I was hoping that the context made that clear. Also, we did not analyze the stability of the correlations, but compared a few more-or-less arbitrary periods, which were mostly stable for the REIT indices within Europe.
Mar
28
comment Portfolio risk-return when assets have limited and inconsistent historical data / time series?
...so for our application, length of the original time series didn't matter much, since we compared country indices and then adjusted the Dutch data to match our and stiched the series together.
Mar
28
comment Portfolio risk-return when assets have limited and inconsistent historical data / time series?
In our case alternatives were obvious - REITs (think stocks on real estate) were available in several European countries for +10 years, but were recently introduced in Germany (as a new legal form). So all we had to do was find the series for countries were REITs were available, then we looked at correlations among multiple lead indices (i.e. DAX for Germany, AEX Netherlands) and picked that country with the high correlations over most indices, and ended up with Netherlands. Honestly, we looked at it, and picked by guts ;-) But again, that was only a client presentation, not real research.
Mar
18
comment Kolmogorov-Smirnov test
I believe Chris' point is that even if you can prove normality, how does this allow you to infer efficient markets? You can use a K-S-Test to do that, but it would not allow you to make statements about whether the market is an efficient one.
Mar
14
comment What is the expected return I should use for the momentum strategy in MV optimization framework?
Is this, from your experience, a common way to develop a strategy for asset managers? I have worked for four different companies (three internships though), all did something similar, but it didn't feel as sophisticated as I expected it to be...
Feb
22
comment Why FX Vanilla Options are quoted in volatility
Sorry, that was not my point. Freddy gave a much better explanation, its about simplifying the set of parameters you are agreeing upon which reduces complexity. The BS-Model is common knowledge, and everybody knows how it works. You can simply translate back and forth between prices and BS-IVs and if you want to use your own model, just use that. Your specific assumptions you mention (proprietary valuation models) do not matter here.