Book contents
- Frontmatter
- Dedication
- Contents
- List of figures
- List of tables
- Acknowledgements
- Part I Our approach in its context
- Part II Dealing with extreme events
- Part III Diversification and subjective views
- Part IV How we deal with exceptional events
- Part V Building Bayesian nets in practice
- Part VI Dealing with normal-times returns
- Part VII Working with the full distribution
- Part VIII A framework for choice
- Part IX Numerical implementation
- Part X Analysis of portfolio allocation
- Appendix I The links with the Black–Litterman approach
- References
- Index
Part IX - Numerical implementation
Published online by Cambridge University Press: 18 December 2013
Book contents
- Frontmatter
- Dedication
- Contents
- List of figures
- List of tables
- Acknowledgements
- Part I Our approach in its context
- Part II Dealing with extreme events
- Part III Diversification and subjective views
- Part IV How we deal with exceptional events
- Part V Building Bayesian nets in practice
- Part VI Dealing with normal-times returns
- Part VII Working with the full distribution
- Part VIII A framework for choice
- Part IX Numerical implementation
- Part X Analysis of portfolio allocation
- Appendix I The links with the Black–Litterman approach
- References
- Index
Summary
In this part of the book we present the numerical techniques needed to turn the ideas presented so far into an efficient allocation algorithm. In particular, first we show how to solve efficiently the full optimization problem. Then, in Chapter 25, we show that two approximations are both surprisingly effective and capable of recasting the full optimization problem into a much simpler and more familiar mean-variance framework.
The surprising effectiveness of these approximations will also give us additional insight on the stability problem (which we first touched upon in Chapter 8). We shall expand on this insight in the final parts of the book.
- Type
- Chapter
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- Portfolio Management under StressA Bayesian-Net Approach to Coherent Asset Allocation, pp. 371 - 374Publisher: Cambridge University PressPrint publication year: 2014