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When You Hedge Discretely : Optimization of Sharpe Ratio for Delta-Hedging Strategy under Discrete Hedging and Transaction Costs

Sepp, Artur - 2015

We consider the delta-hedging strategy for a vanilla option under the discrete hedging and transaction costs, assuming that an option is delta-hedged using the Black-Scholes-Merton model with the log-normal volatility implied by the market price of the option. We analyze the expected...

Persistent link: https://www.econbiz.de/10013037890

Portfolio Theory

Viole, Fred - 2016

extension of modern portfolio theory, namely the redefinition of the second stage via partial moments and the probabilistic …

Persistent link: https://www.econbiz.de/10012989591

Protective Asset Allocation (PAA) : A Simple Momentum-Based Alternative for Term Deposits

Keller, Wouter J. - 2016

Since the financial crisis of 2008 and the recent (end of 2015) pull back, investors are searching for less risky investments. Therefore, there is a growing demand for low risk/absolute return portfolios. In this paper we describe a simple dual-momentum model (called Protective Asset Allocation...

Persistent link: https://www.econbiz.de/10012995291

Next Generation of Indexing : Combining Optimized Indexing with Dynamic Beta Management

Kula, Gökhan - 2015

The first generation of indexing started with plain vanilla market-cap weighted indices. Based on the 1st generation of indexing, "smarter" approaches to equity beta were created, which are nowadays marketed as "Smart Beta" indices (2nd generation). Nevertheless these still exhibit severe...

Persistent link: https://www.econbiz.de/10013032110

Optimal Diversification in the Presence of Parameter Uncertainty for a Risk Averse Investor

Dubois, Mathieu - 2015

We consider an investor who faces parameter uncertainty in a continuous-time financial market. We model the investor's preference by a power utility function leading to constant relative risk aversion. We show that the loss in expected utility is large when using a simple plug-in strategy for...

Persistent link: https://www.econbiz.de/10013033022

Information Ratio Analysis of Momentum Strategies

Ferreira, Fernando - 2015

In the past 20 years, momentum or trend following strategies have become an established part of the investor toolbox. We introduce a new way of analyzing momentum strategies by looking at the information ratio (IR, average return divided by standard deviation). We calculate the theoretical IR of...

Persistent link: https://www.econbiz.de/10013034189

Value-at-Risk Bounds with Variance Constraints

Bernard, Carole - 2015

Recent literature deals with bounds on the Value-at-Risk (VaR) of risky portfolios when only the marginal distributions of the components are known. In this paper we study Value-at-Risk bounds when the variance of the portfolio sum is also known, a situation that is of considerable interest in...

Persistent link: https://www.econbiz.de/10013034868

Tail Hedging Strategies

Strub, Issam S. - 2018

adjusts the exposure level based on a measure of tail risk obtained by applying Extreme Value Theory (EVT) to estimate …

Persistent link: https://www.econbiz.de/10012938485

Expected Returns Independent Allocations

Susinno, Gabriele - 2015

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...

Persistent link: https://www.econbiz.de/10013018612

Demystifying Rebalancing Premium : A Methodological Path to Risk Premia Engineering

Dubikovsky, Vladislav - 2015

Volatility is usually considered as a synonym for risk. Mainstream financial theory states that higher portfolio … framework that encompasses various investment styles and portfolio construction methodologies. Modern Portfolio Theory is a one … theory. We show that Markowitz portfolios and Warren Buffett's investment style are valid special cases of optimal growth …

Persistent link: https://www.econbiz.de/10013018815