Tracking error with minimum guarantee constraints
In recent years the popularity of indexing has greatly increased in financial markets and many different families of products have been introduced. Often these products also have a minimum guarantee in the form of a minimum rate of return at specified dates or a minimum level of wealth at the end of the horizon. Period of declining stock market returns together with low interest rate levels on Treasury bonds make it more difficult to meet these liabilities. We formulate a dynamic asset allocation problem which takes into account the conflicting objectives of a minimum guaranteed return and of an upside capture of the risky asset returns. To combine these goals we formulate a double tracking error problem using asymmetric tracking error measures in the multistage stochastic programming framework.
|Date of creation:||Nov 2008|
|Contact details of provider:|| Postal: Dorsoduro, 3825/E, 30123 Venezia|
Phone: ++39 041 2346910-6911
Fax: ++ 39 041 5221756
Web page: http://www.dma.unive.it/
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.:
- Sørensen, Carsten, 1999. "Dynamic Asset Allocation and Fixed Income Management," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 34(04), pages 513-531, December.
- Brennan, M.J. & Solanki, R., 1981. "Optimal Portfolio Insurance," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 16(03), pages 279-300, September.
- Hiroshi Konno & Hiroaki Yamazaki, 1991. "Mean-Absolute Deviation Portfolio Optimization Model and Its Applications to Tokyo Stock Market," Management Science, INFORMS, vol. 37(5), pages 519-531, May.
- Consiglio, Andrea & Saunders, David & Zenios, Stavros A., 2006. "Asset and liability management for insurance products with minimum guarantees: The UK case," Journal of Banking & Finance, Elsevier, vol. 30(2), pages 645-667, February.
- Suleyman Basak & Alex Shapiro & Lucie Teplá, 2006.
"Risk Management with Benchmarking,"
INFORMS, vol. 52(4), pages 542-557, April.
- Basak, Suleyman & Shapiro, Alex & Teplá, Lucie, 2005. "Risk Management with Benchmarking," CEPR Discussion Papers 5187, C.E.P.R. Discussion Papers.
- Grossman, Sanford J & Zhou, Zhongquan, 1996. " Equilibrium Analysis of Portfolio Insurance," Journal of Finance, American Finance Association, vol. 51(4), pages 1379-1403, September.
- Diana Barro & Elio Canestrelli, 2009. "Tracking error: a multistage portfolio model," Annals of Operations Research, Springer, vol. 165(1), pages 47-66, January.
- Diana Barro & Elio Canestrelli, 2005. "Tracking Error: a multistage portfolio model," GE, Growth, Math methods 0510012, EconWPA.
- El Karoui, Nicole & Jeanblanc, Monique & Lacoste, Vincent, 2005. "Optimal portfolio management with American capital guarantee," Journal of Economic Dynamics and Control, Elsevier, vol. 29(3), pages 449-468, March.
- Griselda Deelstra & Martino Grasselli & Pierre-François Koehl, 2004. "Optimal design of the guarantee for defined contribution funds," ULB Institutional Repository 2013/7602, ULB -- Universite Libre de Bruxelles.
- Muermann, Alexander & Mitchell, Olivia S. & Volkman, Jacqueline M., 2006. "Regret, portfolio choice, and guarantees in defined contribution schemes," Insurance: Mathematics and Economics, Elsevier, vol. 39(2), pages 219-229, October.
- Griselda Deelstra & Martino Grasselli & Pierre-François Koehl, 2003. "Optimal investment strategies in the presence of a minimum guarantee," ULB Institutional Repository 2013/7598, ULB -- Universite Libre de Bruxelles.
- Rudolf, Markus & Wolter, Hans-Jurgen & Zimmermann, Heinz, 1999. "A linear model for tracking error minimization," Journal of Banking & Finance, Elsevier, vol. 23(1), pages 85-103, January.
- Basak, Suleyman, 1995. "A General Equilibrium Model of Portfolio Insurance," Review of Financial Studies, Society for Financial Studies, vol. 8(4), pages 1059-1090.
- Alexander, Gordon J. & Baptista, Alexandre M., 2006. "Portfolio selection with a drawdown constraint," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 3171-3189, November. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:vnm:wpaper:172. 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: (Marco LiCalzi)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.