Portfolio management with targeted constant market volatility

Doan, Bao; Papageorgiou, Nicolas; Reeves, Jonathan J.; Sherris, Michael

doi:10.1016/j.insmatheco.2018.09.010

Cited by 9 publications

(20 citation statements)

References 27 publications

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“…Sample paths in Figure 1(a) show that the dynamic rebalancing strategy offers improved returns relative to the static case in the long run. This is consistent with existing literature such as Morrison and Tadrowski (2013), Doan et al (2018) and Li et al (2019) who note that target volatility strategies limit losses by disinvesting from equities during high volatility periods and vice versa. Figure 1(b) shows a typical sample on how the weights of the dynamic trading strategy change through time due to changing market conditions.…”

Section: Illustrative Performance Of a Target Volatility Strategysupporting

confidence: 92%

“…Volatility forecasting has mainly been facilitated with the aid of time series-based techniques, such as the generalized autoregressive conditional heteroskedasticity (GARCH) framework (Bollerslev, 1986). Doan et al (2018) devise target volatility forecasting strategies and assess their performance relative to benchmark indices in the Australian, German, UK and US markets. The authors create portfolios consisting of welldiversified stock holdings and stock index futures.…”

Section: Introductionmentioning

confidence: 99%

“…While Doan et al (2018) and majority of prior literature use time seriesbased techniques such as the GARCH framework, this work devises a continuous time framework by simulating the Heston (1993) stochastic volatility model. In implementing a target volatility strategy for a GSA pool, we compare GSA benefit profiles emerging under a static fund composition and when the fund is rebalanced dynamically.…”

Section: Introductionmentioning

confidence: 99%

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Target Volatility Strategies for Group Self-Annuity Portfolios

Olivieri¹,

Thirurajah²,

Ziveyi

2022

ASTIN Bull.

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While the current pandemic is causing mortality shocks globally, the management of longevity risk remains a major challenge for both individuals and institutions. It is high time there be private market solutions designed for efficient longevity risk transfer among various stakeholders such as individuals, pension funds and annuity providers. From individuals’ point of view, appealing features of post-retirement solutions include stable and satisfactory benefit levels, flexibility, meeting bequest preferences and low fees. This paper proposes a dynamic target volatility strategy for group self-annuitization (GSA) schemes aimed at enhancing living benefits for pool participants. More specifically, we suggest investing GSA funds in a portfolio consisting of equity and cash, continuously rebalanced to maintain a target volatility level. The performance of a dynamic target volatility strategy is assessed against the static case which does not involve portfolio rebalancing. Benefit profiles are assessed by analysing quantiles and alternative strategies involving varying equity compositions. The case of death benefits is included, and the fund dynamics analysed by assessing resulting investment returns and the mortality credits. Overall, higher living benefit profiles are obtained under a dynamic target volatility strategy. From the analysis performed, a trade-off between the equity proportion and the impact on the lower quantile of the living benefit amount emerges, suggesting an optimal proportion of equity composition.

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Section: Illustrative Performance Of a Target Volatility Strategysupporting

confidence: 92%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Target Volatility Strategies for Group Self-Annuity Portfolios

Olivieri¹,

Thirurajah²,

Ziveyi

2022

ASTIN Bull.

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“…In particular, traditional risky assets such as stock indices are replaced with volatility target (VolTarget) strategies. Investment mechanisms of this nature have been extensively utilized in both portfolio management, as demonstrated by Reference 5, and pension funds or annuity provisions, as evidenced by Reference 6. In the context of financial applications, Reference 7 offers the first comprehensive analysis of the VolTarget strategies, characterizing them as the underlying asset in an option embedded in a structured investment product.…”

Section: Introductionmentioning

confidence: 99%

Time‐invariant portfolio strategies in structured products with guaranteed minimum equity exposure

Persio

Mancinelli

Oliva

et al. 2023

Appl Stoch Models Bus & Ind

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We introduce a new exotic option to be used within structured products to address a key disadvantage of standard time‐invariant portfolio protection: the well‐known cash‐lock risk. Our approach suggests enriching the framework by including a threshold in the allocation mechanism so that a guaranteed minimum equity exposure (GMEE) is ensured at any point in time. To be able to offer such a solution still with hard capital protection, we apply an option‐based structure with a dynamic allocation logic as underlying. We provide an in‐depth analysis of the prices of such new exotic options, assuming a Heston–Vasicek‐type financial market model, and compare our results with other options used within structured products. Our approach represents an interesting alternative for investors aiming at downsizing protection via time‐invariant portfolio protection strategies, meanwhile being also afraid to experience a cash‐lock event triggered by market turmoils.

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“…Seguindo com estudo dos fundos de pensão da modalidade CD, Doan et al (2018), construíram portfólios de ações com enfoque na volatilidade constante, visando performance superior ao benchmark do índice de ações, referente aos mercados da Alemanha, Austrália, EUA e Reino Unido, com foco nas estratégias de investimento para acumulação de recursos no longo prazo, utilizando a métrica da análise univariada, contrapondo as análises multivariadas da literatura (mais complexas). Como resultados para os planos CD, os autores enfatizaram que há maximização dos retornos desses planos na data estipulada para recebimento dos benefícios, maior saldo das reservas e minimização do risco de depreciação dos investimentos, porém, podendo levar a maior exposição.…”

Section: O Problema De Pesquisaunclassified

Gestão de riscos de fundos de pensão: análise das alocações dos fundos de pensão fechados de 2010 a 2017

Domeneghetti¹

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Aos meus pais, Albino e Aparecida (in memorian), pelos ensinamentos, exemplos de vida e amor eterno.Ao meu amado filho, Gustavo, pela prazerosa convivência proporcionando experimentar a paternidade na plenitude do amor incondicional, doação e alegria.A minha esposa querida, Rose, pelo amor, apoio, companheirismo nesse e em outros desafios vividos.As minhas irmãs, Vânia, Vaneide e Vilma, por nossa união de vida. Aos meus sobrinhos, Lívia, Lucas, Matheus e Vitor,pela alegria e felicidade em tê-los.Ao Dema (in memorian), Geralda, Rosane, Eduardo pela ajuda de sempre na jornada. Ao amigo Dessoti,pelo auxílio nesse mundo da tecnologia da informação.

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Portfolio management with targeted constant market volatility

Cited by 9 publications

References 27 publications

Target Volatility Strategies for Group Self-Annuity Portfolios

Target Volatility Strategies for Group Self-Annuity Portfolios

Time‐invariant portfolio strategies in structured products with guaranteed minimum equity exposure

Gestão de riscos de fundos de pensão: análise das alocações dos fundos de pensão fechados de 2010 a 2017

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