Tail risk arises at multiple stages in the investment management process – from the high level asset allocation decision down to the individual portfolio manager's process for selecting securities. We believe that conventional practices followed in these investment decision processes, largely...

Most plan sponsors formulate a single long term asset allocation for their assets, and then spend a great deal of effort to select a number of active managers within each silo of asset class or style. This process, they hope, combines their top down asset class return expectations (beta) with...

This paper takes an investor's view on the problem of delegating asset management authority to a manager. We study the implications of a typical hedge fund contract when the manager is allowed to adjust the activeness of the portfolio dynamically over time in a setting similar to Carpenter...

Conventional methods of asset allocation employ a mean variance framework for allocating assets across asset classes, with the assumption of a symmetrical normal distribution of returns. However, in the context of multiple active strategies such as multi-strategy funds or fund-of-funds, three...

Portfolio rebalancing rules are used by large scale asset managers to manage a trade-off between frequent rebalancing on one hand, and a cost of deviating from the portfolio benchmark on the other. This note contributes to the design of such policies in two ways. First, it clarifies the...

The paper studies optimal monetary policy and its implication for the term structure of interest rates when the nominal short rate is bounded at zero. We state the monetary authority's optimization problem in continuous time according to two specifications, interest rate stabilization and...