SERVING THE QUANTITATIVE FINANCE COMMUNITY

 
User avatar
ntruwant
Topic Author
Posts: 121
Joined: August 3rd, 2004, 9:50 am

good asset allocation models?

June 14th, 2008, 9:02 am

can anyone recommend any good asset allocation models?Thanks!
 
User avatar
KackToodles
Posts: 4100
Joined: August 28th, 2005, 10:46 pm

good asset allocation models?

June 14th, 2008, 10:00 pm

capm?
 
User avatar
ntruwant
Topic Author
Posts: 121
Joined: August 3rd, 2004, 9:50 am

good asset allocation models?

June 18th, 2008, 5:34 am

I am wondering how an insurance company or a bank decides to invest the part of their revenues in shares, the part in bonds, ... and after this: which shares, which bonds,..are there any models to assist in this exercise?
 
User avatar
ntruwant
Topic Author
Posts: 121
Joined: August 3rd, 2004, 9:50 am

good asset allocation models?

June 28th, 2008, 2:13 pm

come on guys: it's not possible that nobody knows an answer: do you use capm, apt, Wilkie model, ... in practise to determine longterm investments of the company?
 
User avatar
DavidJN
Posts: 1752
Joined: July 14th, 2002, 3:00 am

good asset allocation models?

June 28th, 2008, 2:14 pm

Black Litterman
 
User avatar
Siberian
Posts: 298
Joined: June 25th, 2003, 8:56 pm

good asset allocation models?

June 30th, 2008, 2:52 pm

BL does not give you anything unless you feed it a prior (like market view) and your own view, it is a blending mechanism and not a return forecastWe have an economics department that uses a macroeconometric model to come up with the forecast of returns/risk for all the asset classes that we trade, from that point it's a simple optimization with a qualitative overview. what you are asking is a very broad almost a rhetorical question, every bank/asset manager struggles with the better allocation model. In general this is top-down asset allocation combined with bottom-up security selection, models and methods vary widely across asset managers, some are not optimizing at any stage, some optimize at both, most do the mix. Some try to build ginormous macro models not dissimilar to the ones employed by the CBs for the top-down allocations, some just take some kind of average risk/return profiles of the assets themselves, so there is really no one dominating model imho,Siberian
 
User avatar
rle2281
Posts: 8
Joined: January 16th, 2008, 5:06 pm

good asset allocation models?

June 30th, 2008, 4:31 pm

I work for an insurance company and we created our own model for our allocation purposes. To simplify our process I would say the inputs are mostly company related (with a few macro economic inputs) and help determine profitability while the outputs allow us to see the results given different allocations.Not sure if that helps but that's the short story of how we do it.
 
User avatar
ntruwant
Topic Author
Posts: 121
Joined: August 3rd, 2004, 9:50 am

good asset allocation models?

July 3rd, 2008, 1:14 pm

I ask the question within the context of Dynamic Financial Analysis for an insurance company. I have found a study that concentrates on the Wilkie model for the assets, but the model is very concentrated on the UK market.I wonder how medium size insurers, that don't have an entire econometric department, do their asset allocation: do they calibrate the knownmodels with figures of certain other econometric papers (if yes: do you know any good reference for the European market?), or with basic statistics of f.e. the government or do all these insurers have an econometrician?
 
User avatar
Alan
Posts: 10211
Joined: December 19th, 2001, 4:01 am
Location: California
Contact:

good asset allocation models?

July 3rd, 2008, 3:45 pm

One general approach is to develop long-term forecasts for the asset categories you are interested in,create some sensible allocations, do some simulations of results, and see if you can tolerate the tail losses.A long time ago, there was a study of this sort that attracted some interest in the US by Ibbotson and Sinquefield.I and some co-authors simplied their approach -- the latter paper is available at the Sheen Kassouf publication siteAs to how a small/medium size insurance company actually goes about it, they hire a chief investment officer who thenhires a consultant to do something similar. Or, if they're really small, the CIO gets the firm's money managers to do something similar for free. Then, they have a committee meeting to approve it. Now, the committee's are all meeting daily to discover what step went wrong! regards,
Last edited by Alan on July 2nd, 2008, 10:00 pm, edited 1 time in total.
 
User avatar
TraderJoe
Posts: 11048
Joined: February 1st, 2005, 11:21 pm

good asset allocation models?

July 3rd, 2008, 5:54 pm

Presumably you've read Markowitz on Portfolio Theory.
 
User avatar
rle2281
Posts: 8
Joined: January 16th, 2008, 5:06 pm

good asset allocation models?

July 3rd, 2008, 7:10 pm

Our Investment team is pretty small, 4 people, to manage appx. 1.5B and we decide our allocation ourselves with no oversight which is pretyy nice.
 
User avatar
KackToodles
Posts: 4100
Joined: August 28th, 2005, 10:46 pm

good asset allocation models?

July 6th, 2008, 12:06 am

QuoteOriginally posted by: rle2281Our Investment team is pretty small, 4 people, to manage appx. 1.5B and we decide our allocation ourselves with no oversight which is pretyy nice. if nobody is looking, aren't you tempted to make some wild bets for fun?
 
User avatar
rle2281
Posts: 8
Joined: January 16th, 2008, 5:06 pm

good asset allocation models?

July 7th, 2008, 12:26 pm

About as "fun" as we get is a few private equity deals that we're involved in but my two bosses are very conservative. Sometimes I think they're more into capital preservation than total return. I'm trying to shift their focus but they're quite set in their ways.
 
User avatar
KackToodles
Posts: 4100
Joined: August 28th, 2005, 10:46 pm

good asset allocation models?

July 7th, 2008, 8:55 pm

QuoteOriginally posted by: rle2281About as "fun" as we get is a few private equity deals that we're involved in but my two bosses are very conservative. Sometimes I think they're more into capital preservation than total return. I'm trying to shift their focus but they're quite set in their ways. as long as you preserve capital, you keep your job. that's why EVERY manager's #1 priority is to preserve capital. why risk getting fired?
 
User avatar
rle2281
Posts: 8
Joined: January 16th, 2008, 5:06 pm

good asset allocation models?

July 9th, 2008, 5:57 pm

"as long as you preserve capital, you keep your job. that's why EVERY manager's #1 priority is to preserve capital. why risk getting fired?"Being an insurance company we're suppose to generate majority of our income not from the actual premiums paid but the income on investing those premiums until they have to be paid out to the insured. Granted we're still doing okay but it'd be nice to be able to participate in the market more and try to take advantage of opportunities (like our ability for longer holding periods) rather than sitting on the sidelines all the time.
ABOUT WILMOTT

PW by JB

Wilmott.com has been "Serving the Quantitative Finance Community" since 2001. Continued...


Twitter LinkedIn Instagram

JOBS BOARD

JOBS BOARD

Looking for a quant job, risk, algo trading,...? Browse jobs here...


GZIP: On