A Constant-Volatility Framework for Managing Tail Risk

Autor:	Nicolas Papageorgiou, Alexandre Hocquard, Sunny Ng
Rok vydání:	2013
Předmět:	Economics and Econometrics Variance swap Actuarial science business.industry Diversification (finance) Financial risk management General Business Management and Accounting Purchasing Accounting Economics Portfolio Tail risk Volatility (finance) business Finance Risk management
Zdroj:	The Journal of Portfolio Management. 39:28-40
ISSN:	2168-8656 0095-4918
DOI:	10.3905/jpm.2013.39.2.028
Popis:	Since Lehman Brothers collapsed in 2008, tail-risk hedging has become an increasingly important concern for investors. Traditional approaches, such as purchasing options or variance swaps as insurance, are often expensive, illiquid, and result in a substantial drag on performance. A more prudent, cost-effective way to maintain a constant risk exposure is to actively manage portfolio exposure according to the prevailing volatility level within underlying assets. The authors implement a robust methodology based on Dybvig’s payoff distribution model to target a constant level of volatility and normalize monthly returns. This approach to portfolio and risk management can help investors obtain their desired risk exposures over both short and longer time frames, reduce exposure to tail risk, and in general increase portfolios’ risk-adjusted performance.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_________::1eb0d300477f920a71bca0d00836b904 https://doi.org/10.3905/jpm.2013.39.2.028 Zobrazit plný text záznamu