Practical Scenario-Dependent Portfolio Optimization: A Framework to Combine Investor Views and Quantitative Discipline into Acceptable Portfolio Decisions

Roberts L. Grava

Chapter 9 in Interest Rate Models, Asset Allocation and Quantitative Techniques for Central Banks and Sovereign Wealth Funds, 2010, pp 178-188 from Palgrave Macmillan

Abstract: Abstract Depending on the institution, personnel, teams or culture, getting marketfacing professionals with specific investment views to become enthusiastic about processes that impose quantitative discipline around their decisions can be a challenge of varying difficulty. At the risk of greatly oversimplifying matters, front office staff have exhibited tendencies to be less enthusiastic about utility functions, risk aversion parameters, yield curve factors and forecast confidence levels, more enthusiastic about their own concrete views about levels or prices in the financial markets they transact in and fairly confident about their investment decisions taken based on these intuitive views. With increasing dimensions of investment decision-making, however (multiple markets, curves, currency risk, credit risk, sector decisions, etc.), quantitative and computational assistance become quite important in reaching investment decisions that yield acceptable results.

Keywords: Portfolio Optimization; Asset Return; Portfolio Manager; Downside Risk; Asset Class (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_9

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DOI: 10.1057/9780230251298_9

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