Investors assign part of their funds to asset managers that are given the task of beating a benchmark. The risk management department usually imposes a maximum value of the tracking error volatility (TEV) in order to keep the risk of the portfolio near to that of the selected benchmark. However,...

Markowitz’s (1952) portfolio theory has permeated financial institutions over the past 50 years. Assuming that returns are normally distributed, Markowitz suggests that portfolio optimization should be performed in a mean-variance framework. With the emergence of hedge funds and their...

This article discusses the theoretical analysis and practical application of the model of semideterministic multiperiod immunization, used in the management of assets and liabilities. The emphasis is on the main theorems, underlying the theory of the immunization, the formulation of the...

Contemporary financial stochastic programs typically involve a trade-off between 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 focuses on the estimation of mutual fund styles by return-based style analysis. Usually, the investment style is assumed to be either constant through time, or time variation is implicitly accounted for by using rolling regressions. The former assumption is often contradicted by data...

We suggest that the term structure of volatility futures (e.g. VIX futures) shows a clear pattern of dependence on the current level of VIX index. At the low level of VIX (below 20) the term structure is highly upward sloping; at the high VIX level (over 30) it is strongly downward sloping. We...

In this paper, we study the optimal dynamic asset allocation strategy for the ELA scheme of DC pension plan during the distribution phase. In an ELA scheme of DC pension plan, the assets are invested in equities and bonds, and are distributed to the plan participants by an actuarial method. The...

The investment style and the change of the investment style of the share weighted funds trading in Turkey for the period December 2006 to December 2009 are aimed to be determined, by this study. Thus the contents of the investment funds are carried out in the context of share indexes and...

We consider the portfolio selection problem in the accumulation phase of a defined contribution (DC) pension scheme. We solve the mean-variance portfolio selection problem using the embedding technique pioneered by Zhou and Li (2000) and show that it is equivalent to a target-based optimization...

In this paper, we study the optimal investment strategy in the DC pension plan during the accumulation phase. During the accumulation phase, a pension member contributes a predetermined amount of money as premiums and the management of the pension plan invests the premiums in equities and bonds...