KTH Matematik  

Matematisk Statistik

Tid: 7 Juni 2010 kl 15.15-16.00.

Plats : Seminarierummet 3733, Institutionen för matematik, KTH, Lindstedts väg 25. (observera dagen och lokalen), Karta!

Föredragshållare: Jörg Hofmeister

Titel: Portfolio Optimization with Structured Products: A quantitative approach to rebalancing portfolios of index linked principle protected notes and non-principle protected certificates (Examensarbete – Master thesis)


Investors holding structured products are advised to rebalance their positions in order to lock in profits or to enhance their portfolios' return potential. This thesis analyzes rebalancing situations that arise when investing in principle protected notes and non-principle protected certificates, which are linked to a stock index. The rebalancing decision is determined in a two-stage procedure. In the first stage, return scenarios are generated by simulating the evolution of the structured products' risk factors under the physical measure. Structured products are traded over-the-counter and therefore the investor is exposed to credit risk. The presented approach incorporates this risk factor. The simulation procedure is based on a statistical factor model using Principle Component Analysis. In the second stage, the portfolio weight adjustments are determined by solving a scenario optimization program that takes into account trading constraints and proportional transaction costs. Experiments conclude that the representative quality of the scenarios is insufficient when the simulation procedure is solely based on historical data. Adding a subjective view to the simulation methodology can increase the representativeness of the scenarios, depending on the accuracy of the view. The conducted investigations conclude that rebalancing is necessary in order to meet the investor's risk requirements and to maximize the reward potential.

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Sidansvarig: Filip Lindskog
Uppdaterad: 25/02-2009