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Extreme events robust portfolio construction in the presence of fat tails /

Main Author: Kemp, Malcolm H. D.
Corporate Author: ebrary, Inc.
Format: Book
Language:English
Published: Hoboken, N.J. : Wiley, 2011.
Series:Wiley finance
Subjects:
Exchange traded funds.
Online Access:http://site.ebrary.com/lib/ucy/Doc?id=10494528
Table of Contents:
  • Machine generated contents note: Preface
  • Acknowledgements
  • Abbreviations
  • Notation
  • 1 Introduction
  • 1.1 Extreme events
  • 1.2 The portfolio construction problem
  • 1.3 Coping with really extreme events
  • 1.4 Risk budgeting
  • 1.5 Elements designed to maximise benefit to readers
  • 1.6 Book structure
  • 2. Fat Tails - In Single (i.e. Univariate) Return Series
  • 2.1 Introduction
  • 2.2 A fat tail relative to what?
  • 2.3 Empirical examples of fat-tailed behaviour in return series
  • 2.4 Characterising fat-tailed distributions by their moments
  • 2.5 What causes fat tails?
  • 2.6 Lack of diversification
  • 2.7 A time-varying world
  • 2.8 Stable distributions
  • 2.9 Extreme value theory (EVT)
  • 2.10 Parsimony
  • 2.11 Combining different possible source mechanisms
  • 2.12 The practitioner perspective
  • 2.13 Implementation challenges
  • 3. Fat Tails - In Joint (i.e. Multivariate) Return Series
  • 3.1 Introduction
  • 3.2 Visualisation of fat tails in multiple return series
  • 3.3 Copulas and marginals - Sklar's theorem
  • 3.4 Example analytical copulas
  • 3.5 Empirical estimation of fat tails in joint return series
  • 3.6 Causal dependency models
  • 3.7 The practitioner perspective
  • 3.8 Implementation challenges
  • 4. Identifying Factors That Significantly Influence Markets
  • 4.1 Introduction
  • 4.2 Portfolio risk models
  • 4.3 Signal extraction and principal components analysis
  • 4.4 Independent Components Analysis
  • 4.5 Blending together PCA and ICA
  • 4.6 The potential importance of selection effects
  • 4.7 Market dynamics
  • 4.8 Distributional mixtures
  • 4.9 The practitioner perspective
  • 4.10 Implementation challenges
  • 5. Traditional Portfolio Construction Techniques
  • 5.1 Introduction
  • 5.2 Quantitative versus qualitative approaches?
  • 5.3 Risk-return optimisation
  • 5.4 More general features of mean-variance optimisation
  • 5.5 Manager Selection
  • 5.6 Dynamic optimisation
  • 5.7 Portfolio construction in the presence of transaction costs
  • 5.8 Risk budgeting
  • 5.9 Backtesting portfolio construction techniques
  • 5.10 Reverse optimisation and implied view analysis
  • 5.11 Portfolio optimisation with options
  • 5.12 The practitioner perspective
  • 5.13 Implementation challenges
  • 6. Robust Mean-Variance Portfolio Construction
  • 6.1 Introduction
  • 6.2 Sensitivity to the input assumptions
  • 6.3 Certainty equivalence, credibility weighting and Bayesian statistics
  • 6.4 Traditional robust portfolio construction approaches
  • 6.5 Shrinkage
  • 6.6 Bayesian approaches applied to position sizes
  • 6.7 The 'universality' of Bayesian approaches
  • 6.8 Market consistent portfolio construction
  • 6.9 Re-sampled mean-variance portfolio optimisation
  • 6.10 The practitioner perspective
  • 6.11 Implementation challenges
  • 7. Regime Switching and Time-Varying Risk and Return Parameters
  • 7.1 Introduction
  • 7.2 Regime switching
  • 7.3 Investor utilities
  • 7.4 Optimal portfolio allocations for regime switching models
  • 7.5 Links with derivative pricing theory
  • 7.6 Transaction costs
  • 7.7 Incorporating more complex autoregressive behaviour
  • 7.8 Incorporating more intrinsically fat-tailed behaviour
  • 7.9 More heuristic ways of handling fat tails
  • 7.10 The practitioner perspective
  • 7.11 Implementation challenges
  • 8. Stress Testing
  • 8.1 Introduction
  • 8.2 Limitations of current stress testing methodologies
  • 8.3 Traditional stress testing approaches
  • 8.4 Reverse stress testing
  • 8.5 Taking due account of stress tests in portfolio construction
  • 8.6 Designing stress tests statistically
  • 8.7 The practitioner perspective
  • 8.8 Implementation challenges
  • 9. Really Extreme Events
  • 9.1 Introduction
  • 9.2 Thinking outside the box
  • 9.3 Portfolio purpose
  • 9.4 Uncertainty as a fact of life
  • 9.5 Market implied data
  • 9.6 The importance of good governance and operational management
  • 9.7 The practitioner perspective
  • 9.8 Implementation challenges
  • 10. The Final Word
  • 10.1 Conclusions
  • 10.2 Portfolio construction principles in the presence of fat tails
  • Appendix: Exercises
  • A.1 Introduction
  • A.2 Fat Tails - In Single (i.e. Univariate) Return Series
  • A.3 Fat Tails - In Joint (i.e. Multivariate) Return Series
  • A.4 Identifying Factors That Significantly Influence Markets
  • A.5 Traditional Portfolio Construction Techniques
  • A.6 Robust Mean-Variance Portfolio Construction
  • A.7 Regime Switching and Time-Varying Risk and Return Parameters
  • A.8 Stress Testing
  • A.9 Really Extreme Events.

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