The Factor-Portfolios Approach to Asset Management using Genetic Algorithms
We present an investment process that: (i) decomposes securities into risk factors; (ii) allows for the construction of portfolios of assets that would selectively expose the manager to desired risk factors; (iii) perform a risk allocation between these portfolios, allowing for tracking error restrictions in the optimization process and (iv) give the flexibility to manage dinamically the transfer coeffficient (TC). The contribution of this article is to present an investment process that allows the asset manager to limit risk exposure to macro-factors - including expectations on correlation dynamics - whilst allowing for selective exposure to risk factors using mimicking portfolios that emulate the behaviour of given specific. An Artificial Intelligence (AI) optimisation technique is used for risk-budget allocation to factor-portfolios.
|Date of creation:|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (57-1) 3431111
Fax: (57-1) 2841686
Web page: http://www.banrep.org/publicaciones/pub_borra.htmEmail:
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Vineer Bhansali & Mark B. Wise, 2001. "Forecasting Portfolio Risk in Normal and Stressed Markets," Papers nlin/0108022, arXiv.org, revised Sep 2001.
- Alejandro Revéiz Herault & Sebastian Rojas, .
"The case for active management from the perspective of Complexity Theory,"
Borradores de Economia
495, Banco de la Republica de Colombia.
- Aeljandro Reveiz Herault & Sebastian Rojas, 2008. "The case for active management from the perspective of Complexity Theory," BORRADORES DE ECONOMIA 004566, BANCO DE LA REPÚBLICA.
- Charles S. Morris & Robert Neal & Douglas Rolph, 1998. "Credit spreads and interest rates : a cointegration approach," Research Working Paper 98-08, Federal Reserve Bank of Kansas City.
When requesting a correction, please mention this item's handle: RePEc:bdr:borrec:511. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Camilo Millán)
If references are entirely missing, you can add them using this form.