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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26779
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| Title: | Risk Management with Benchmarking |
| Authors: | Basak, Suleyman
Shapiro, Alex
Tepla, Lucie |
| Keywords: | Benchmarking
Investments
shortfall Risk
Tracking Error
value-at-risk |
| Issue Date: | Oct-2001 |
| Series/Report no.: | S-CDM-01-04 |
| Abstract: | Portfolio theory must address the fact that in reality, portfolio
managers are evaluated relative to a benchmark, and therefore adopt risk
management practices to account for the benchmark performance. We
capture this risk management consideration by allowing a prespecified
shortfall from a target benchmark-linked return, consistent with growing
interest in such practice. In a dynamic setting, we demonstrate how a
risk averse portfolio manager optimally under- or overperforms a target
benchmark under different economic conditions, depending on his attitude
towards risk and choice of the benchmark. Investors can therefore
achieve their desired gain/loss characteristics for funds under
management through an appropriate combined choice of the benchmark and
money manager. |
| URI: | http://hdl.handle.net/2451/26779 |
| Appears in Collections: | Credit & Debt Markets
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