English, Article edition: On loss-avoiding payoff distribution in a dynamic portfolio management problem K.K. Thampi; M.J. Jacob

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Bookmark: http://trove.nla.gov.au/version/30924
Physical Description
  • article
Language
  • English

Edition details

Title
  • On loss-avoiding payoff distribution in a dynamic portfolio management problem
Author
  • K.K. Thampi
  • M.J. Jacob
Physical Description
  • article
Notes
  • Purpose – The aim of this paper is to propose and analyse policies capable of generating left-skewed pension distributions. Such policies can deliver large pension values with high probability and hence are of interest to practical fund managers. Design/​methodology/​approach – The paper uses a computational method capable of solving stochastic optimal control problems. The optimal strategies obtained through the method are used to simulate dynamic portfolio management. Findings – The paper finds that optimisation of locally non-concave performance measures has produced left-skewed payoff distributions of small VaR and CVaR. The distributions remain left-skewed for relatively large values of the diffusion parameter. Practical implications – On the basis of the findings, it would seem beneficial for real-world fund managers to implement this kind of optimising “cautious-relaxed” policy. Originality/​value – A novel non-concave performance measure has been proposed in the paper to describe a portfolio manager's aim. The computed “cautious-relaxed” policies have been shown to realise this aim.
  • Loss prevention, Numerical analysis, Optimization techniques, Pension funds, Portfolio investment
  • RePEc:eme:jrfpps:v:9:y:2008:i:2:p:151-172
Language
  • English
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