meucci

meucci - Introduction Black-Litterman Meuccis Model...

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Unformatted text preview: Introduction Black-Litterman Meuccis Model Mutilvariate Skew-t Conclusion Models for Quantitative Portfolio Management Part 2 : Black Litterman and Meuccis Model Pierre GARREAU Florida State University September 17 th 2009 P. Garreau Models for Quantitative Portfolio Management Part 2 : Black Litterman and M Introduction Black-Litterman Meuccis Model Mutilvariate Skew-t Conclusion Asset Allocation Markowitz model Credit Portfolio Investment Universe : Corporate Bonds, CDS, Equities and Options. Structural Models for CDS depend on Qualitative Data : Balance Sheet. Managers decisions based on Morning signals, News and Intraday Info. Need to Specify views in a Markowitz type Framework. P. Garreau Models for Quantitative Portfolio Management Part 2 : Black Litterman and M Introduction Black-Litterman Meuccis Model Mutilvariate Skew-t Conclusion Asset Allocation Markowitz model Framework Choice of a fully invested portfolio h = [ h 1 , h 2 ,..., h N ] T in a universe of N securities. Location and Dispersion measure are Mean f and Variance . The investors are Risk Averse with utility function U ( h ) = h T f- h T h . h = argmax h H U ( h ) where H = X h i = 1 , h > c , h T r f 2 B < q P. Garreau Models for Quantitative Portfolio Management Part 2 : Black Litterman and M Introduction Black-Litterman Meuccis Model Mutilvariate Skew-t Conclusion Asset Allocation Markowitz model Figure: Efficient frontier for a universe of 5 Stocks : Exxon, City, Boeing, Ford, SnP - November 2008 P. Garreau Models for Quantitative Portfolio Management Part 2 : Black Litterman and M Introduction Black-Litterman Meuccis Model Mutilvariate Skew-t Conclusion Asset Allocation Markowitz model Figure: Efficient frontier for a universe of 5 Stocks : Exxon, City, Boeing, Ford, SnP - November 2008 - Shortsell 20 % - Perturbation P. Garreau Models for Quantitative Portfolio Management Part 2 : Black Litterman and M Introduction Black-Litterman Meuccis Model Mutilvariate Skew-t Conclusion Asset Allocation Markowitz model Limitations The risk premium for positive deviations is the same as negative deviations : Approximation of Investors satifaction Optimizer overweigths high expected returns and negatively correlated securities. Optimizer subject to estimation errors. Relevance of the risk aversion parameter ? Covariances estimation. P. Garreau Models for Quantitative Portfolio Management Part 2 : Black Litterman and M Introduction Black-Litterman Meuccis Model Mutilvariate Skew-t Conclusion The Set Up A Posteriori Distribution Discussion Discussion The Market The market is represented as a random variable X . f X N ( , ) The market distribution is affected by estimation risk....
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meucci - Introduction Black-Litterman Meuccis Model...

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