Portfolio Construction and Risk Budgeting

498 Pages·2010·3.871 MB·English

by  Bernd Scherer

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Scherer’s Portfolio Construction and Risk
By Bernd Scherer
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PEFC Certified
This book has been
produced entirely from
sustainable papers that
are accredited as PEFC
compliant.
www.pefc.org
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Portfolio Construction and Risk Budgeting
FourthEdition
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Portfolio Construction and Risk Budgeting
FourthEdition
Bernd Scherer
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PublishedbyRiskBooks,aDivisionofIncisiveFinancialPublishingLtd
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ToKatja,Leonhard,Sebastian,JanaandKatharina
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Contents
AbouttheAuthor ix
Introduction xi
1 APrimeronPortfolioTheory 1
2 ApplicationinMean–VarianceInvesting 51
3 IncorporatingDeviationsfromNormality:LowerPartial
Moments 75
4 PortfolioResamplingandEstimationError 113
5 RobustPortfolioOptimisationandEstimationError 143
6 BayesianAnalysisandPortfolioChoice 165
7 TestingPortfolioConstructionMethodologiesOut-of-Sample 209
8 PortfolioConstructionwithTransactionCosts 223
9 PortfolioOptimisationwithOptions:FromtheStatic
ReplicationofCPPIStrategiestoaMoreGeneralFramework 263
10 ScenarioOptimisation 281
11 Core–SatelliteInvesting:BudgetingActiveManagerRisk 307
12 Benchmark-RelativeOptimisation 337
13 RemovingLong-OnlyConstraints:120/20Investing 375
14 Performance-BasedFees,IncentivesandDynamicTracking
ErrorChoice 389
15 Long-TermPortfolioChoice 417
16 RiskManagementforAsset-ManagementCompanies 439
Index 473
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About the Author
BerndSchererteachesfinanceatEDHECBusinessSchoolandisa
member of EDHEC Risk. He is also on the management board of
theLondonQuantGroup.BeforejoiningEDHEChewasmanaging
directorandglobalheadofQuantitativeAssetAllocationatMorgan
StanleyInvestmentManagement,wherehewasresponsibleforthe
creationofactiveinvestmentstrategieswithincommodities,foreign
exchange,creditandvolatilityproducts.Duringhis16-yearcareer
in asset management he has held various senior positions at Mor-
gan Stanley, Deutsche Bank, Oppenheim Investment Management
andJ.P.MorganInvestmentManagement.Bernd’scurrentresearch
interests focus on signal construction, portfolio optimisation and
assetliabilitymodelling.Hehaswrittensixbooksandmorethan50
publicationsinleadingacademicandpractitionerjournals,suchas
theJournalofBankingandFinance,JournalofFinancialMarkets,Jour-
nalofEconomicsandStatistics,JournalofPortfolioManagement,Finan-
cialAnalystsJournal,JournalofInvestmentManagement,Risk,Financial
Markets and Portfolio Management, Journal of Asset Management, etc.
Bernd holds MBAand MSc degrees from the University of Augs-
burgandtheUniversityofLondon,aswellasaPhDinfinancefrom
theUniversityofGiessen.
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