This paper analyzes the relevance of a set of some performance measures for optimal portfolios including hedge funds. Four criteria are considered: the Sharpe Ratio, the Returns on VaR and on CVaR, and the Omega performance measure. The results are illustrated by an allocation on several...

In this paper, we show the interest of the time-varying coefficient model in hedge fund performance assessment and selection. We argue that the alpha of hedge funds is dynamic and that the time-varying alpha captures this dynamic behavior. Therefore, forming portfolios based on their...

Hedge funds offer desirable risk-return profiles; but we also find high management fees, lack of transparency and worse, very limited liquidity (they are often closed to new investors and disinvestment fees can be prohibitive). This creates an incentive to replicate the attractive features of...

Execution traders know that market impact greatly depends on whether their orders lean with or against the market. We introduce the OEH model, which incorporates this fact when determining the optimal trading horizon for an order, an input required by many sophisticated execution strategies....

This paper uses a novel numerical optimization technique – robust optimization – that is well suited to solving the asset-liability management (ALM) problem for pension schemes. It requires the estimation of fewer stochastic parameters, reduces estimation risk and adopts a prudent approach...

Contemporary financial stochastic programs typically involve a trade-offbetween return and (downside)-risk. Using stochastic programming we characterize analytically (rather than numerically) the optimal decisions that follow from characteristic single-stage and multi-stage versions of such...

This paper finds the optimal consumption and asset allocation strategy for an Australian retiree who aims to maintain a level of minimum consumption. I use a discrete dynamic programming algorithm, with historical stock return distribution and a regime switching investment model, while taking...

First developed by Markowitz (1952), the mean-variance framework is the most widespread theoretical approximation to the portfolio problem. Nevertheless, successful application in the investment community has been limited. Assumptions such as normality of returns and a static correlation matrix...

This article studies optimal portfolio decisions with (long-term) liabilities for small-open economy based investors, including the optimality of currency hedging (Walker (2008a)). The representative investor is based in Chile, but results are likely to hold more generally. The problem is set up...