Book contents
- Frontmatter
- Dedication
- Contents
- List of figures
- List of tables
- Acknowledgements
- Part I Our approach in its context
- Part II Dealing with extreme events
- Part III Diversification and subjective views
- Part IV How we deal with exceptional events
- Part V Building Bayesian nets in practice
- Part VI Dealing with normal-times returns
- Part VII Working with the full distribution
- Part VIII A framework for choice
- Part IX Numerical implementation
- Part X Analysis of portfolio allocation
- Appendix I The links with the Black–Litterman approach
- References
- Index
Part III - Diversification and subjective views
Published online by Cambridge University Press: 18 December 2013
- Frontmatter
- Dedication
- Contents
- List of figures
- List of tables
- Acknowledgements
- Part I Our approach in its context
- Part II Dealing with extreme events
- Part III Diversification and subjective views
- Part IV How we deal with exceptional events
- Part V Building Bayesian nets in practice
- Part VI Dealing with normal-times returns
- Part VII Working with the full distribution
- Part VIII A framework for choice
- Part IX Numerical implementation
- Part X Analysis of portfolio allocation
- Appendix I The links with the Black–Litterman approach
- References
- Index
Summary
In the previous parts of this book we have argued the merits of causal over an association-based way of dealing with stress events, and we have tried to put our proposed approach in the context of some well-known ways to look at extreme events and outliers. In this part we look at the similarities and differences between what we propose and some better established ways to deal with diversification and to assign subjective scenarii. Not surprisingly, Modern Portfolio Theory, pioneered by Markowitz half a century ago, is the best place to start. We also look, however, at the approaches by Black–Litterman, Meucci and Doust, because of their releva nce to the assignment of subjective views.
In Part III we also introduce for the first time the topic of stability (of the allocation weights). Achieving stability will be one of the underlying themes of our book, and we shall therefore return to the topic in the later parts.
- Type
- Chapter
- Information
- Portfolio Management under StressA Bayesian-Net Approach to Coherent Asset Allocation, pp. 51 - 54Publisher: Cambridge University PressPrint publication year: 2014