Asset Allocation for Taxable Investor
In the presence of taxation, pretax, after-tax risk, and return characteristics may be significantly different. For this reason, taxable entities …
level III
Constraints in Asset Allocation
An asset owner must consider a number of constraints when modeling and choosing among asset allocation alternatives. Some of the …
Goals-Based and Miscellaneous Approaches
The goals-based approach to asset allocation is useful for individual investors, who typically have a number of (sometimes conflicting) objectives, with different …
Liability Relative Asset Allocations
Liability-relative asset allocation is aimed at the general issue of rendering decisions about asset allocation in conjunction with the investor’s …
Factor Based Asset Allocation
An alternative approach used by some practitioners is to move away from an opportunity set of asset classes to an opportunity set …
Risk Budgeting Approach
There are three aspects to risk budgeting: The risk budget identifies the total amount of risk and allocates the risk …
Monte Carlo Simulations and Addressing Criticisms of MVO
Monte Carlo Simulation Monte Carlo simulation complements MVO by addressing the limitations of MVO as a single-period framework. In the …
Mean Variance Optimization
Mean-variance optimization (MVO) is the most common approach to asset allocation. It assumes investors are risk averse, so they prefer more …
Strategic Asset Allocation
Strategic asset allocation is long term in nature; hence, the weights are called targets and the portfolio represented by the strategic asset …
Approaches to Asset Allocation
Asset-only approaches to asset allocation focus solely on the asset side of the investor’s balance sheet. Liabilities are not explicitly …