Search results for "Downside risk"
showing 10 items of 13 documents
A multi-objective genetic algorithm for cardinality constrained fuzzy portfolio selection
2012
This paper presents a new procedure that extends genetic algorithms from their traditional domain of optimization to fuzzy ranking strategy for selecting efficient portfolios of restricted cardinality. The uncertainty of the returns on a given portfolio is modeled using fuzzy quantities and a downside risk function is used to describe the investor's aversion to risk. The fitness functions are based both on the value and the ambiguity of the trapezoidal fuzzy number which represents the uncertainty on the return. The soft-computing approach allows us to consider uncertainty and vagueness in databases and also to incorporate subjective characteristics into the portfolio selection problem. We …
Fuzzy portfolio optimization under downside risk measures
2007
This paper presents two fuzzy portfolio selection models where the objective is to minimize the downside risk constrained by a given expected return. We assume that the rates of returns on securities are approximated as LR-fuzzy numbers of the same shape, and that the expected return and risk are evaluated by interval-valued means. We establish the relationship between those mean-interval definitions for a given fuzzy portfolio by using suitable ordering relations. Finally, we formulate the portfolio selection problem as a linear program when the returns on the assets are of trapezoidal form.
Asymmetric semi-volatility spillover effects in EMU stock markets
2018
Abstract The aim of this paper is to quantify the strength and the direction of semi-volatility spillovers between five EMU stock markets over the 2000–2016 period. We use upside and downside semi-volatilities as proxies for downside risk and upside opportunities. In this way, we aim to complement the literature, which has focused mainly on the contemporaneous correlation between positive and negative returns, with the evidence of asymmetry also in semi-volatility transmission. For this purpose, we apply the Diebold and Yilmaz (2012) methodology, based on a generalized forecast error variance decomposition, to downside and upside realized semi-volatility series. While the analysis of Diebol…
Comment on “A simple way to incorporate uncertainty and risk into forest harvest scheduling”
2017
In a recent research article, Robinson et al. (2016) described a method of estimating uncertainty of harvesting outcomes by analyzing the historical yield to the associated prediction for a large number of harvest operations. We agree with this analysis, and consider it a useful tool to integrate estimates of uncertainty into the optimization process. The authors attempt to manage the risk using two different methods, based on deterministic integer linear programming. The first method focused on maximizing the 10th quantile of the distribution of predicted volume subject to area constraint, while the second method focused on minimizing the variation of total quantity of volume harvested sub…
Uninformed Traders in European Stock Markets
2010
A fully informed agent bets with an uninformed over the capital gains of an asset. A divide-and-choose idea is adapted to induce both trade and revelation of information, but in equlibrium the uninformed buys high and sells low if he is downside risk averse. The result may be seen as an informed-price-maker counterpart of some findings of Glosten-Milgrom (1985) and Kyle (1985) on uninformed agents trading in financial markets.
Fuzzy Portfolio Selection Models: A Numerical Study
2012
In this chapter we analyze the numerical performance of some possibilistic models for selecting portfolios in the framework of risk-return trade-off. Portfolio optimization deals with the problem of how to allocate wealth among several assets, taking into account the uncertainty involved in the behavior of the financial markets. Different approaches for quantifying the uncertainty of the future return on the investment are considered: either assuming that the return on every individual asset is modeled as a fuzzy number or directly measuring the uncertainty associated with the return on a given portfolio. Conflicting goals representing the uncertain return on and risk of a fuzzy portfolio a…
Exposure-Based Cash-Flow-At-Risk for Value-Creating Risk Management Under Macroeconomic Uncertainty
2010
A strategically minded CFO will realize that strategic corporate risk management is about finding the right balance between risk prevention and proactive value generation. Efficient risk and performance management requires adequate assessment of risk and risk exposures on the one hand and performance on the other. Properly designed, a risk measure should provide information on to what extend the firm's performance is at risk, what is causing that risk, the relative importance of non-value-adding and value-adding risk, and the possibilities to use risk management to reduce total risk. In this chapter, we present an approach – exposure-based cash-flow-at-risk – to calculating a firm's downsid…
Compensation Options in Joint Ventures. A Real Options Approach
2007
This research focuses on a cluster of dynamic reallocation and restatement of ownership clauses contained in joint venture agreements. These clauses, with potentially significant financial implications, govern the transfer of rights between the parties on two key financial issues: the allocation of profits and losses and the ownership interests in the joint venture. The central contribution of this research is to consider these clauses themselves as non-standard real options and to propose a methodology for assessing their values. Determination of such values will be essential throughout the joint venture negotiation process. In addition, we provide valuable information on another key quest…
The value of integrative risk management for insurance products with guarantees
2001
Insurance liabilities are converging with capital markets products (e.g. derivatives and securitizations), thereby increasing the demand for integrated asset and liability management strategies. This article compares the value-added by an integrative approach-based on scenario optimization modelling-relative to traditional risk management methods. The authors present some examples of products offered by the insurance industry in Italy, and apply the results of the analysis to the design of competitive insurance policies. © Emerald Backfiles 2007.
Risk-Managed 52-Week High Industry Momentum, Momentum Crashes, and Hedging Macroeconomic Risk
2017
This is the first study that investigates the profitability of Barroso and Santa-Clara’s (2015) risk managing approach for George and Hwang’s (2004) 52-week high momentum strategy in an industrial portfolio setting. The findings indicate that risk-managing adds value as the Sharpe ratio increases, and the downside risk remarkably decreases. Even after controlling for the spread of the traditional 52-week high industry momentum strategy in association with standard risk-factors, the risk-managed version generates economically and statistically significant payoffs. Notably, the risk-managed strategy is partially explained by changes in cross-sectional return dispersion, whereas the traditiona…