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This paper examines the effectiveness of using futures contracts as hedging instruments of: (1) alternative models of volatility for estimating conditional variances and covariances; (2) alternative currencies; and (3) alternative maturities of futures contracts. For this purpose, daily data of...
Persistent link: https://www.econbiz.de/10013113663
The paper examines the performance of four multivariate volatility models, namely CCC, VARMA-GARCH, DCC and BEKK, for the crude oil spot and futures returns of two major benchmark international crude oil markets, Brent and WTI, to calculate optimal portfolio weights and optimal hedge ratios, and...
Persistent link: https://www.econbiz.de/10013149486
This paper presents the theoretical and applicative model elaborated by Harry Markowitz on the determination of the structure of the efficient securities portfolio. In this sense, in order to determine the structure of the efficient Markowitz portfolio (PE), a Lagrange function is built and...
Persistent link: https://www.econbiz.de/10012062904
Persistent link: https://www.econbiz.de/10012988207
We propose a new approach that allows for incorporating qualitative views, such as ordering information, into estimates of future asset returns within the Black-Litterman model. We develop a mathematical framework and numerical computation methods for this setting. We find importance sampling to...
Persistent link: https://www.econbiz.de/10012889873
discrete ill-posed problem with box constraints. We show how this framework allows for a priori investor expectations and risk … parameters to be applied in the optimization process for robust position risk management. We use implied volatility decreases … that this model can be applied dynamically to manage portfolio risk for positions with multiple options and an underlying …
Persistent link: https://www.econbiz.de/10014236189
The Bayes-Stein model provides a framework for remedying parameter uncertainty in the Markowitz mean-variance portfolio optimization. The classical version, however, suffers from estimation errors of model components and fails to consistently outperform the naive 1/N asset allocation rule. We...
Persistent link: https://www.econbiz.de/10014236791
DeMiguel, Garlappi, and Uppal (2009) conducted a highly influential study where they demonstrated that none of the optimized portfolios consistently outperformed the naive diversification. This result triggered a heated debate within the academic community on whether portfolio optimization adds...
Persistent link: https://www.econbiz.de/10012990819
benchmark for all decreasing absolute risk-averse investors, using Quadratic Programming. The method is applied to standard data … the performance of Mean-Variance optimization by tens to hundreds of basis points per annum, for low to medium risk levels …. The improvements critically depend on imposing the complex condition of Decreasing Absolute Risk Aversion in addition to …
Persistent link: https://www.econbiz.de/10012932280
A portfolio of independent, but not identically distributed, returns is optimized under the variance risk measure, in … borrowed from the theory of disordered systems. The no-short selling constraint acts as an asymmetric ℓ<sub>1</sub> regularizer …
Persistent link: https://www.econbiz.de/10012965487