A central problem in risk management is to identify the optimal combination (or portfolio) of actions that improves the reliability of the system most through reducing failure event probabilities, subject to the availability of resources. This optimal portfolio can be sensitive with regard to epistemic uncertainties about the failure events’ probabilities. In this paper, we develop an optimizat...

Portfolio optimisation typically aims to provide an optimal allocation that minimises risk, at a given return target, by diversifying over different investments. However, the potential scope of such risk diversification can be limited if investments are concentrated in only one country, or more specifically one currency. Multi-currency portfolio is an alternative to achieve higher returns and m...

A constant rebalanced portfolio is an asset allocation algorithm which keeps the same distribution of wealth among a set of assets along a period of time. Recently, there has been work on on-line portfolio selection algorithms which are competitive with the best constant rebalanced portfolio determined in hindsight (Cover, 1991; Helmbold et al., 1996; Cover and Ordentlich, 1996). By their natur...

The purpose of this study is to find the relationship between lending to Small and Medium-size Exporter Enterprises (E-SMEs) and the use of Basel II Capital Accord for the first time in the banking system of Iran. Results showed that 96.69 percent of small firms were in the very low risk category of credit portfolio. This proof explains a consistent and balanced relationship between risk- weigh...

We provide a formal treatment of both static and dynamic portfolio choice using the Disappointment Aversion preferences of Gul (1991), which imply asymmetric aversion to gains versus losses. Our dynamic formulation nests the standard CRRA asset allocation problem as a special case. Using realistic data generating processes, we find reasonable equity portfolio allocations for disappointment aver...

• Determining an effective rebalancing strategy is a function of the portfolio’s assets: their expected returns, their volatility, and the correlation of their returns. For example, a high correlation among the returns of a portfolio’s assets means that they tend to move together, which will tend to reduce the need for rebalancing. In addition, the investment time horizon affects the rebalancin...

Trading volume of infinitely lived securities, such as equity, is generically zero in Lucas asset-pricing models with heterogeneous agents. More generally, the end-of-period portfolio of all securities is constant over time and states in the generic economy. General equilibrium restrictions rule out trading of equity after an initial period. This result contrasts the prediction of portfolio all...

An important challenge of portfolio allocation arises when the (true) characteristics of returns distribution are replaced by some estimates. This introduces estimation risk, which is crucial for portfolio management just like traditional financial risk. This paper contrasts with existing literature by focusing on a different measure of performance. We borrow from practitioners and evaluate dif...

In the aftermath of the financial crisis, investors and asset allocators have started the usual ritual of rethinking the way they approached asset allocation and risk management. Academic/Practitioner journals are full of articles that are supposed to show investors what went wrong and how they can adjust their models and theories in order to protect themselves against substantial losses next t...