Extreme Events: Robust Portfolio Construction in the Presence of Fat Tails (Wiley Finance Series) - Hardcover

Kemp, Malcolm

Hardcover

ISBN 10: 0470750138 ISBN 13: 9780470750131

Verlag: Wiley, 2010

Inhaltsangabe

"With slight exaggeration, a case can be made that modern finance has been built, in practice, if not in theory, on implicit tolerance and widespread ignorance of extreme events."
--Jean Pierre Landau, Deputy Governor, Banque du France
 
Markets are fat-tailed; extreme outcomes occur more often than many might hope, or indeed the statistics or normal distributions might indicate. In this book, the author provides readers with the latest tools and techniques on how best to adapt portfolio construction techniques to cope with extreme events. Beginning with an overview of portfolio construction and market drivers, the book will analyze fat tails, what they are, their behavior, how they can differ and what their underlying causes are. The book will then move on to look at portfolio construction techniques which take into account fat tailed behavior, and how to stress test your portfolio against extreme events. Finally, the book will analyze really extreme events in the context of portfolio choice and problems. The book will offer readers:
* Ways of understanding and analyzing sources of extreme events
* Tools for analyzing the key drivers of risk and return, their potential magnitude and how they might interact
* Methodologies for achieving efficient portfolio construction and risk budgeting
* Approaches for catering for the time-varying nature of the world in which we live
* Back-stop approaches for coping with really extreme events
* Illustrations and real life examples of extreme events across asset classes
 
This will be an indispensible guide for portfolio and risk managers who will need to better protect their portfolios against extreme events which, within the financial markets, occur more frequently than we might expect.

Über diesen Titel

Über die Autorinnen und Autoren

Malcolm Kemp (London, UK) is Founder and Managing director of Nematrian Ltd, a consulting firm delivering services to the quantitative finance and actuarial communities. Previously, he was Director and Head of the Quantitative Research Team at Threadneedle Asset Management, responsible for the derivative desk and its portfolio risk measurement and management activities. He is a leading expert on derivatives, performance measurement, risk measurement, liability driven investment and other quantitative investment techniques. Prior to this, Malcolm was a partner at Bacon & Woodrow in their investment consultancy practice. He holds a first class degree in Mathematics from Cambridge University and is also a Fellow of the Institute of Actuaries. He is a regular on the conference circuit, including Risk Europe and GARP events where he speaks on a range of portfolio management and derivatives topics.

Malcolm Kemp (London, UK) is Founder and Managing director of Nematrian Ltd, a consulting firm delivering services to the quantitative finance and actuarial communities. Previously, he was Director and Head of the Quantitative Research Team at Threadneedle Asset Management, responsible for the derivative desk and its portfolio risk measurement and management activities. He is a leading expert on derivatives, performance measurement, risk measurement, liability driven investment and other quantitative investment techniques. Prior to this, Malcolm was a partner at Bacon & Woodrow in their investment consultancy practice. He holds a first class degree in Mathematics from Cambridge University and is also a Fellow of the Institute of Actuaries. He is a regular on the conference circuit, including Risk Europe and GARP events where he speaks on a range of portfolio management and derivatives topics.

Von der hinteren Coverseite

Taking due account of extreme events when constructing portfolios of assets or liabilities is a key discipline for market professionals. Extreme events are a fact of life in how markets operate.

In Extreme Events: Robust Portfolio Construction in the Presence of Fat Tails, leading export Malcolm Kemp shows readers how to analyse market data to uncover fat-tailed behavior, how to incorporate expert judgement in the handling of such information, and how to refine portfolio construction methodologies to make portfolios less vulnerable to extreme events or to benefit more from them.

This is the only text that combines a comprehensive treatment of modern risk budgeting and portfolio construction techniques with the specific refinements needed t for them to handle extreme events. It explains in a logical sequence what constitutes fat-tailed behavior and why it arises, how we can analyse such behaviour, at aggregate, sector or instrument level, and how we can then take advantage of this analysis.

Along the way, it provides a rigorous, comprehensive and clear development of traditional portfolio construction methodologies applicable if fat-tails are absent. It then explains how to refine these methodologies to accommodate real world behaviour.

Throughout, the book highlights the importance of expert opinion, showing that even the most data-centric portfolio construction approaches ultimately depend on practitioner assumptions about how the world might behave.

The book includes:

• Key concepts and methods involved in analyzing extreme events
• A comprehensive treatment of mean-variance investing, Bayesian methods, market consistent approaches, risk budgeting, and their application to manager and instrument selection
• A systematic development of the refinements needed to traditional portfolio construction methodologies to cater for fat-tailed behaviour
• Latest developments in stress testing and back testing methodologies
• A strong focus on the practical implementation challenges that can arise at each step in the process and on how to overcome these challenges

Details zur Ausgabe

• Verlag: Wiley
• Erscheinungsdatum: 2010
• Sprache: Englisch
• ISBN 10: 0470750138
• ISBN 13: 9780470750131
• Einband: Gebundene Ausgabe
• Auflage: 1
• Anzahl der Seiten: 336
• Kontakt zum Hersteller: Nicht verfügbar
• Verantwortliche Person: Nicht verfügbar