Portfolio Optimization of Hedge Funds in a Downside Risk Framework (Optimisation de Portefeuille des Hedge Funds dans le cadre du Downside Risk)

2008 ◽  
Author(s):  
Chokri Mamoghli ◽  
Sami Daboussi
Keyword(s):  
Portfolio Optimization ◽  
Hedge Funds ◽  
Downside Risk ◽  
Risk Framework

scholarly journals Mean-Variance Optimization Is a Good Choice, But for Other Reasons than You Might Think

Risks ◽  
2020 ◽  
Vol 8 (1) ◽  
pp. 29 ◽  
Author(s):  
Andrea Rigamonti
Keyword(s):  
Portfolio Optimization ◽  
Asset Allocation ◽  
Risk Measures ◽  
Traditional Approach ◽  
Real Data ◽  
Downside Risk ◽  
Good Choice ◽  
Mean Variance Portfolio ◽  
Mean Variance ◽  
Allocation Decisions

Mean-variance portfolio optimization is more popular than optimization procedures that employ downside risk measures such as the semivariance, despite the latter being more in line with the preferences of a rational investor. We describe strengths and weaknesses of semivariance and how to minimize it for asset allocation decisions. We then apply this approach to a variety of simulated and real data and show that the traditional approach based on the variance generally outperforms it. The results hold even if the CVaR is used, because all downside risk measures are difficult to estimate. The popularity of variance as a measure of risk appears therefore to be rationally justified.

RISK MEASUREMENT OF INVESTMENTS IN THE SATELLITE RING OF A CORE-SATELLITE PORTFOLIO: TRADITIONAL VERSUS ALTERNATIVE APPROACHES

2004 ◽  
Vol 49 (01) ◽  
pp. 105-130 ◽  
Author(s):  
HILARY TILL
Keyword(s):  
Hedge Funds ◽  
Measurement Techniques ◽  
Risk Measurement ◽  
Additional Risk ◽  
Economic Basis ◽  
Risk Framework ◽  
Alternative Approaches

This paper provides a risk framework for fiduciaries by considering using a core-satellite approach to investing. While the article mainly covers the additional risk measurement techniques, which are needed when investing in hedge funds, its recommendations are also relevant for other investments that have default, devaluation, and/or liquidity risks associated with them. Also, while the article's focus is on quantitative techniques, we note that a fiduciary must also understand the economic basis for each investment's returns.

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