Search results for "Upside potential ratio"

Scenario optimization asset and liability modelling for individual investors

2006

We develop a scenario optimization model for asset and liability management of individual investors. The individual has a given level of initial wealth and a target goal to be reached within some time horizon. The individual must determine an asset allocation strategy so that the portfolio growth rate will be sufficient to reach the target. A scenario optimization model is formulated which maximizes the upside potential of the portfolio, with limits on the downside risk. Both upside and downside are measured vis- `a-vis the goal. The stochastic behavior of asset returns is captured through bootstrap simulation, and the simulation is embedded in the model to determine the optimal portfolio. …