Corporate FX risk management has gained complexity with increased number of currencies involved and varying correlations among them. Existing literature has highlighted the need to account for cross-currency correlations when optimizing hedge ratios for portfolio management (Dowd, 1999). In this...

We propose a framework that allows a portfolio manager to quantify the probability of simultaneous losses in multiple assets of a collateral portfolio. Using this framework, we propose a methodology to conduct stress tests on the market value of the portfolio of collateral when undesirable...

Traditional portfolio optimization models specify placement of capital as rather irrevocably and fully at risk through investment horizon(s) or continuously. Under this constraint, asset class allocation typically serves as primary mode of diversification, pursuing risk moderation by seeking to...

In recent years both equity and bond markets have been afflicted by high volatility. In order to build up a portfolio on a quantitative basis, several models may be used, such as minimum variance portfolio or equally weighted portfolio. In 2008/09 another way to deal with diversification came...

In the mutual funds industry the rating process is very important, and Morningstar is surely the most influential international rating agency.In this work we consider the problem of evaluating if the risk component is adequately accounted for in the Morningstar rating. To face this problem we...

VAA (Vigilant Asset Allocation) is a dual-momentum based investment strategy with a vigorous crash protection and a fast momentum filter. Dual momentum combines absolute (trendfollowing) and relative (strength) momentum. Compared to the traditional dual momentum approaches, we have replaced the...

We improve on our Vigilant Asset Allocation (VAA) by the introduction of a separate “canary” universe for signaling the need for crash protection, using the concept of breadth momentum. The amount of cash is now governed by the number of canary assets with bad (non-positive) momentum. The...

We describe a method to improve credit portfolio models based on the Merton model by adding to the underlying distributions forward-looking tails deducted through the Bayesian Networks technology. Given the forward-looking stance of the approach, its results give a better quanti ed picture of...

Resilient Asset Allocation (RAA) is a more aggressive version of our Lethargic Asset Allocation (LAA) strategy. It combines a more robust “All Weather” portfolio with even slower growth-trend (GT) filter and a faster market crash-protection. GT timing goes risk-off only when both the US...