Optimal Construction of a Fund of Funds

Petri Hilli, Matti Koivu and Teemu Pennanen

Chapter 11 in Interest Rate Models, Asset Allocation and Quantitative Techniques for Central Banks and Sovereign Wealth Funds, 2010, pp 207-221 from Palgrave Macmillan

Abstract: Abstract We study the problem of diversifying a given initial capital over a finite number of investment funds that follow different trading strategies. The investment funds operate in a market where a finite number of underlying assets may be traded over a finite discrete time. Our goal is to find a diversification that is optimal in terms of a given convex risk measure (see e.g. Föllmer and Schied 2004, Chapter 4). We formulate an optimization problem in which a portfolio manager is faced with uncertain asset returns as well as liabilities.

Keywords: Euro Area; Risky Asset; Investment Fund; Short Rate; Terminal Wealth (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-25129-8_11

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DOI: 10.1057/9780230251298_11

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