*Tid:***7 juni 2005 kl 1615-1700 **(OBS! dagen!)

*Plats :***Seminarierummet 3721** (OBS! lokalen!), Institutionen för
matematik, KTH, Lindstedts väg 25, plan 7. Karta!

*Föredragshållare:***
Johan Holtsjö.
**

**Titel:** **
Optimal Active Risk Budgeting Model: Applied to Sjunde AP-fonden:
Theory and Implementation.
(Examensarbete)
**

* Sammanfattning: *
The board of Sjunde AP-fonden (AP7) has determined a strategic
asset allocation, a relevant benchmark and a limit for active risk.
The next step is to allocate the risk budget across the various
asset classes and between different asset managers. This has
historically been done with a pragmatic approach, only making
certain that the total active risk is expected to stay within the
risk limit. A natural preference is of course to determine your
management structure, not only by budgeting the risk, but also by
considering the expected return by maximizing the total expected
active return relative to the benchmark subject to a tracking error
limit.

This is where the Optimal Active Risk Budgeting Model comes in to place. The model introduces a four-step procedure to optimally budget the fund's total active risk (tracking error) among its asset classes and asset managers within the asset classes. In other words, the model determines the optimal tracking error for each asset class and asset manager, given a total fund tracking error constraint. The steps are:

- Generate Asset Class Efficient Frontiers.
- Fit a cubic function to the Efficient Frontiers.
- Creating an Active Risk Constraint for Each Asset Class.
- Select the Optimal Manager Allocation.