Asymmetric Volatility and Dynamic Asset Allocation

Dynamic Asset Allocation under Stochastic Volatility - Theory and Practice

This study develops inter-temporal dynamic asset allocation with stochastic volatility (DAASV) models. The DAASV models integrate the stochastic volatility feature inherent in asset returns into the allocation procedure. By applying the DAASV, an investor can more efficiently diversify the unsystematic risks, so as to achieve better performance. We demonstrate that the DAASV models dominate the...

Asset Allocation Models and Market Volatility

While asset allocation and risk management models all assume at least short-term stability of the covariance structure of asset returns, actual covariance and correlation relationships vary wildly, even over short horizons. Moreover, correlations increase in volatile periods, reducing the power of diversification when it might most be desired. We attempt to explain these phenomena and to presen...

Dynamic asset allocation techniques

Investment strategy is often static, punctuated by infrequent reviews. For most long-term investors, this practice results in large risks being taken that could otherwise be managed with a more dynamic investment policy. The bulk of this paper is aimed at analysing and describing two multi-period investment strategy problems – in order to derive potential dynamic strategies. Along the way, we s...

Dynamic Asset Allocation ∗ Claus

Jumps and Dynamic Asset Allocation

This paper analyzes the optimal dynamic asset allocation problem in economies with infrequent events and where the investment opportunities are stochastic and predictable. Analytical approximations are obtained, with which a thorough comparative study is performed on the impacts of jumps upon the dynamic decision. The model is then calibrated to the U.S. equity market. The comparative analysis ...