Asset Management with TEV and VaR;Constraints: the Constrained Efficient;Frontiers
AbstractIt is well known that investors usually assign part of their funds to asset managers who are given the task of beating a benchmark portfolio. On the other hand, the risk management office could impose some restrictions to the asset managers' activity in order to mantain the overall portfolio risk under control. This situation could lead managers to select non efficient portfolios in the total return and absolute risk perspective. In this paper we focus on portfolio efficiency when a tracking error volatility (TEV) constraint holds. First, we define the TEV Constrained-Efficient Frontier (ECTF), a set of TEV constrained portfolios that are mean-variance efficient. Second, we discuss the effects on such boundary when a VaR and/or a variance restriction is also added.
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Bibliographic InfoPaper provided by Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali in its series Working Papers with number 392.
Date of creation: Oct 2013
Date of revision:
asset allocation; efficient portfolio frontiers; tracking error volatility; value at risk;
Find related papers by JEL classification:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-10-18 (All new papers)
- NEP-CSE-2013-10-18 (Economics of Strategic Management)
- NEP-RMG-2013-10-18 (Risk Management)
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