In this paper we formulate the Risk Management Control problem in the interest rate area as a constrained stochastic portfolio optimization problem. The utility that we use can be any continuous function and based on the viscosity theory, the unique solution of the problem is guaranteed. The...

This paper studies a consumption-portfolio problem where money enters the agent's utility function. We solve the corresponding Hamilton-Jacobi-Bellman equation and provide closed-form solutions for the optimal consumption and portfolio strategy both in an infinite- and finite-horizon setting....

This paper proposes a novel methodology to construct optimal portfolios that incorporates the occurrence of systemic events. Investors maximize a modified Sharpe ratio conditional on a systemic event. We solve the portfolio allocation problem analytically under the absence of short-selling...

We extend the Black-Litterman framework beyond normality to general elliptical distributions of investor's views and asset returns and portfolio risk measured by CVaR. Unlike existing solutions, cf. Xiao and Valdez [Quant. Finan. 2015, 15:3, 509-519], the choice of distributions, with the first...

This report provides an overview of the utility of single stock and custom basket options in fund management. It is shown that managers of active equity funds can limit possible negative return contributions of their over - and underweight positions via single stock options and thus help to...

Offshore assets present investors with an increased investment universe and additional opportunities for reward, but embedded exposure to exchange rates can result in additional risk. In this work, we consider a global equity portfolio of five equity indices (US, Japan, Europe, UK and Canada),...

Present market instabilities have prompted great interest on the characteristics of specific portfolios such as minimum variance and equally- weighted risk contribution portfolios as these portfolios do not rely on the estimate of expected returns. Indeed, in turmoil periods traditional market...

This paper explores the optimisation of asset allocation within “alternative” investments, i.e. between private equity and hedge funds, as well as between private equity and public equities. It uses our proprietary Portfolio Blender tool. As a preliminary step before the optimisation, we...

Volatility is usually considered as a synonym for risk. Mainstream financial theory states that higher portfolio volatility is translated into higher expected returns while diversification helps eliminate idiosyncratic risks. This leaves us with an apparent anomaly as low-risk (low-beta) stocks...