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Empirical evidence suggests that asset returns correlate more strongly in bear markets than conventional correlation estimates imply. We propose a method for determining complete tail-correlation matrices based on Value-at-Risk (VaR) estimates. We demonstrate how to obtain more effi cient...
Persistent link: https://www.econbiz.de/10010191900
In this paper we reviewed some numerical algorithms, implemented in R language which solve the Risk Budgeting (RB) allocation problem. We demonstrated that the well known Sequential Quadratic Programming (SQP) whose objective function is not strictly convex, fails to converge for high...
Persistent link: https://www.econbiz.de/10012862959
Persistent link: https://www.econbiz.de/10013131576
We introduce a generic solver for dynamic portfolio allocation problems when the market exhibits return predictability, price impact and partial observability. We assume that the price modeling can be encoded into a linear state-space and we demonstrate how the problem then falls into the LQG...
Persistent link: https://www.econbiz.de/10012980026
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
We implement a long-horizon static and dynamic portfolio allocation involving a risk-free and a risky asset. This model is calibrated at a quarterly frequency for ten European countries. We also use maximum-likelihood estimates and Bayesian estimates to account for parameter uncertainty. We find...
Persistent link: https://www.econbiz.de/10008797745
The popular scholarly exercise of evaluating exchange rate forecasting models relative to a random walk was stimulated by the well-cited Meese and Rogoff (1983) paper. Practitioners who construct quantitative models for trading exchange rates approach forecasting from a different perspective....
Persistent link: https://www.econbiz.de/10013081705
The popular scholarly exercise of evaluating exchange rate forecasting models relative to a random walk was stimulated by the well-cited Meese and Rogoff (1983) paper. Practitioners who construct quantitative models for trading exchange rates approach forecasting from a different perspective....
Persistent link: https://www.econbiz.de/10009743826
Investors often control risk exposure by trading options. This article studies the optimal strategy for liquidating an option position. Under both complete and incomplete market settings, we quantify the value of optimally timing to liquidate, and identify the situations where it is optimal to...
Persistent link: https://www.econbiz.de/10013014538
Persistent link: https://www.econbiz.de/10012222605