Jack L. Treynor Volume 9, Number 3, Third Quarter 2011 View PDF… Read more
2011
Fat Tails and Stop-Losses in Portable Alpha
Mark B. Wise, Yonathan Schwarzkopf and Vineer Bhansali Volume 9, Number 3, Third Quarter 2011 We investigate the optimal stop-loss on the alpha investment for a portable alpha vehicle. The optimal stop-loss maximizes investors utility of wealth for a portfolio consisting of a portable alpha fund and risk free assets. We model the dynamics of… Read more
Hedge Funds: A Sensible Approach to Oversight
Antony E. Ghee Volume 9, Number 3, Third Quarter 2011 After years of debating whether additional regulation should be imposed on hedge funds, legislative initiatives, such as the Dodd-Frank Act, have recently been enacted and could significantly alter the scope of government oversight in an industry that has, until recently, been subject to little regulatory… Read more
Portfolio Diversification
James A. Bennett and Richard W. Sias Volume 9, Number 3, Third Quarter 2011 Contrary to conventional wisdom, there is no evidence investors can, or have ever been able to, easily form portfolios containing negligible exposure to unsystematic returns. Because well-diversified portfolios are the bedrock upon which so much financial theory is built, investors’ inability… Read more
The Performance, Pervasiveness, and Determinants of Value Premium in Different US Exchanges: 1985-2006
George Athanassakos Volume 9, Number 3, Third Quarter 2011 Using AMEX, NASDAQ and NYSE stock market data for the period 1985-2006, this paper sheds further light into the value premium and the discussion of whether the value premium is driven by risk or behavioral factors. The paper utilizes a more comprehensive set of data and… Read more
INSIGHTS: What Interest Rate Models To Use? Buy Side Versus Sell Side
Sanjay K. Nawalkha and Riccardo Rebonato Volume 9, Number 3, Third Quarter 2011 Does the selection of a specific interest rate model to use for pricing, hedging, and risk return analysis depend upon whether the user is a buy-side institution or a sell-side dealer bank? Sanjay Nawalkha and Riccardo Rebonato debate this question in this… Read more
SURVEYS AND CROSSOVERS: Random Lattices for Option Pricing Problems in Finance
Sanjiv R. Das Volume 9, Number 2, Second Quarter 2011 While the use of Monte Carlo methods is well established for pricing derivatives, this paper focuses on a random-lattice approach, also known in the literature as the stochastic-mesh method. The method is reviewed here. We show that the method may be refined with an ad-hoc… Read more
BOOK REVIEWS: The Endowment Model Of Investing: Return, Risk and Diversification
Volume 9, Number 2, Second Quarter 2011 The Endowment Model Of Investing: Return, Risk and Diversification Martin L. Leibowitz, Anthony Bova, P. Brett Hammond Reviewed by Bruce Grantier View PDF… Read more
CASE STUDIES: A Lively Expectation of Favors Yet to be Received
Jack L. Treynor Volume 9, Number 2, Second Quarter 2011 View PDF… Read more
Robust Portfolio Rebalancing with Transaction Cost Penalty An Empirical Analysis
Vitaly Serbin, Milan Borkovec and Michael Chigirinskiy Volume 9, Number 2, Second Quarter 2011 The goal of this paper is to study and compare two popular techniques used by practitioners to reduce the sensitivity of optimal portfolios to uncertainty in expected return for a typical portfolio optimization problem. Specifically, we investigate whether including transaction costs… Read more