Department of Applied Finance and Actuarial Studies
Seminar by Felix Brinkmann
- Topic: Strategic Asset Allocation with Option-Implied Distributions
- Speaker: Felix Brinkmann - Research Assistant and Ph.D. candidate at the Chair of Finance, Georg-August-Universität Göttingen.
- Venue:E4A 523
- When: 23rd March, 2012, (Fri)
- Time: 11am-12:15pm
We study the effect of non Gaussian kernels on the asset allocation of short term CRRA investors in a strategic asset allocation framework consisting of a riskfree (T-Bills) and three risky assets (S&P500, Treasuries, XAU-Index). We find that the allocation do not differ significantly for different risk aversions for asset menus excluding the XAU-index. However, adding the commodity index to the menu, more risk-averse investors tend to hold fewer commodities for more long term bonds. Additionally we evaluate the out-of-sample performance of different portfolio strategies including the forward looking approach introduced by Kostakis, Panigirtzoglou and Skiadopoulos (2011). We find that strategies based on option-implied distributions outperform the historical benchmark, nevertheless passive strategies like 1/N and VAR(1) processes outperform both historical as well as the implied one.