Ebook281 pages5 hours
Managing Downside Risk in Financial Markets
By Frank A. Sortino and Stephen Satchell
Rating: 3 out of 5 stars
3/5
()
About this ebook
Quantitative methods have revolutionized the area of trading, regulation, risk management, portfolio construction, asset pricing and treasury activities, and governmental activity such as central banking to name but some of the applications. Downside-risk, as a quantitative method, is an accurate measurement of investment risk, because it captures the risk of not accomplishing the investor's goal.'Downside Risk in Financial Markets' demonstrates how downside-risk can produce better results in performance measurement and asset allocation than variance modelling. Theory, as well as the practical issues involved in its implementation, is covered and the arguments put forward emphatically show the superiority of downside risk models to variance models in terms of risk measurement and decision making. Variance considers all uncertainty to be risky. Downside-risk only considers returns below that needed to accomplish the investor's goal, to be risky.Risk is one of the biggest issues facing the financial markets today. 'Downside Risk in Financial Markets' outlines the major issues for Investment Managers and focuses on "downside-risk" as a key activity in managing risk in investment/portfolio management. Managing risk is now THE paramount topic within the financial sector and recurring losses through the 1990s has shocked financial institutions into placing much greater emphasis on risk management and control.Free Software Enclosed To help you implement the knowledge you will gain from reading this book, a CD is enclosed that contains free software programs that were previously only available to institutional investors under special licensing agreement to The pension Research Institute. This is our contribution to the advancement of professionalism in portfolio management.The Forsey-Sortino model is an executable program that:1. Runs on any PC without the need of any additional software.2. Uses the bootstrap procedure developed by Dr. Bradley Effron at Stanford University to uncover what could have happened, instead of relying only on what did happen in the past. This is the best procedure we know of for describing the nature of uncertainty in financial markets. 3. Fits a three parameter lognormal distribution to the bootstrapped data to allow downside risk to be calculated from a continuous distribution. This improves the efficacy of the downside risk estimates.4. Calculates upside potential and downside risk from monthly returns on any portfolio manager. 5. Calculates upside potential and downside risk from any user defined distribution.Forsey-Sortino Source Code:1. The source code, written in Visual Basic 5.0, is provided for institutional investors who want to add these calculations to their existing financial services. 2. No royalties are required for this source code, providing institutions inform clients of the source of these calculations. A growing number of services are now calculating downside risk in a manner that we are not comfortable with. Therefore, we want investors to know when downside risk and upside potential are calculated in accordance with the methodology described in this book. Riddles Spreadsheet:1. Neil Riddles, former Senior Vice President and Director of Performance Analysis at Templeton Global Advisors, now COO at Hansberger Global Advisors Inc., offers a free spreadsheet in excel format.2. The spreadsheet calculates downside risk and upside potential relative to the returns on an index
Related to Managing Downside Risk in Financial Markets
Related ebooks
Multi-Asset Risk Modeling: Techniques for a Global Economy in an Electronic and Algorithmic Trading Era Rating: 5 out of 5 stars5/5Professional Automated Trading: Theory and Practice Rating: 4 out of 5 stars4/5Essential Mathematics for Market Risk Management Rating: 5 out of 5 stars5/5Strategic and Tactical Asset Allocation: An Integrated Approach Rating: 0 out of 5 stars0 ratingsFrequently Asked Questions in Quantitative Finance Rating: 3 out of 5 stars3/5Investing in Hedge Funds: A Guide to Measuring Risk and Return Characteristics Rating: 0 out of 5 stars0 ratingsTrend Following with Managed Futures: The Search for Crisis Alpha Rating: 0 out of 5 stars0 ratingsManaged Futures for Institutional Investors: Analysis and Portfolio Construction Rating: 0 out of 5 stars0 ratingsRisk Transfer: Derivatives in Theory and Practice Rating: 0 out of 5 stars0 ratingsModern Asset Allocation for Wealth Management Rating: 0 out of 5 stars0 ratingsIntroduction to R for Quantitative Finance Rating: 4 out of 5 stars4/5Engineering Investment Process: Making Value Creation Repeatable Rating: 0 out of 5 stars0 ratingsPractical Portfolio Performance Measurement and Attribution Rating: 3 out of 5 stars3/5Trading and Money Management in a Student-Managed Portfolio Rating: 0 out of 5 stars0 ratingsThe Known, the Unknown, and the Unknowable in Financial Risk Management: Measurement and Theory Advancing Practice Rating: 0 out of 5 stars0 ratingsForecasting Volatility in the Financial Markets Rating: 4 out of 5 stars4/5STIR Futures: Trading Euribor and Eurodollar futures Rating: 5 out of 5 stars5/5Quantitative Financial Risk Management Rating: 0 out of 5 stars0 ratingsTrading the Fixed Income, Inflation and Credit Markets: A Relative Value Guide Rating: 0 out of 5 stars0 ratingsThe Options Course: High Profit and Low Stress Trading Methods Rating: 0 out of 5 stars0 ratingsAdvanced Trading Rules Rating: 4 out of 5 stars4/5Fixed Income Strategy: A Practitioner's Guide to Riding the Curve Rating: 0 out of 5 stars0 ratingsShort Selling: Strategies, Risks, and Rewards Rating: 5 out of 5 stars5/5Market Neutral Strategies Rating: 3 out of 5 stars3/5How to Calculate Options Prices and Their Greeks: Exploring the Black Scholes Model from Delta to Vega Rating: 5 out of 5 stars5/5Advances in Portfolio Construction and Implementation Rating: 3 out of 5 stars3/5Modelling Stock Market Volatility: Bridging the Gap to Continuous Time Rating: 4 out of 5 stars4/5Financial Markets and Trading: An Introduction to Market Microstructure and Trading Strategies Rating: 4 out of 5 stars4/5Pairs Trading: Quantitative Methods and Analysis Rating: 3 out of 5 stars3/5Smart Portfolios: A practical guide to building and maintaining intelligent investment portfolios Rating: 5 out of 5 stars5/5
Personal Finance For You
Summary of The 48 Laws of Power by Robert Greene Rating: 4 out of 5 stars4/5The Psychology of Money: Timeless lessons on wealth, greed, and happiness Rating: 5 out of 5 stars5/5Rich Dad Poor Dad Rating: 5 out of 5 stars5/5The Millionaire Next Door Rating: 4 out of 5 stars4/5The Black Girl's Guide to Financial Freedom: Build Wealth, Retire Early, and Live the Life of Your Dreams Rating: 5 out of 5 stars5/5We Should All Be Millionaires: A Woman’s Guide to Earning More, Building Wealth, and Gaining Economic Power Rating: 4 out of 5 stars4/5Legal Loopholes: Credit Repair Tactics Exposed Rating: 4 out of 5 stars4/5Summary of I Will Teach You To Be Rich: by Ramit Sethi | Includes Analysis Rating: 3 out of 5 stars3/5Same as Ever: Timeless Lessons on Risk, Opportunity and Living a Good Life Rating: 4 out of 5 stars4/5Personal Finance For Dummies Rating: 4 out of 5 stars4/5Get the Hell Out of Debt: The Proven 3-Phase Method That Will Radically Shift Your Relationship to Money Rating: 5 out of 5 stars5/5Set for Life: An All-Out Approach to Early Financial Freedom Rating: 4 out of 5 stars4/5Money Hacks: 275+ Ways to Decrease Spending, Increase Savings, and Make Your Money Work for You! Rating: 4 out of 5 stars4/5The Intelligent Investor, Rev. Ed: The Definitive Book on Value Investing Rating: 4 out of 5 stars4/5The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns Rating: 4 out of 5 stars4/5The White Coat Investor: A Doctor's Guide to Personal Finance and Investing Rating: 4 out of 5 stars4/5Summary of R. Nelson Nash's Becoming Your Own Banker Rating: 0 out of 5 stars0 ratingsBuy, Rehab, Rent, Refinance, Repeat: The BRRRR Rental Property Investment Strategy Made Simple Rating: 5 out of 5 stars5/5Financial Feminist: Overcome the Patriarchy's Bullsh*t to Master Your Money and Build a Life You Love Rating: 5 out of 5 stars5/5Money. Wealth. Life Insurance. Rating: 5 out of 5 stars5/5Rich Dad's Cashflow Quadrant Rating: 4 out of 5 stars4/5Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not! Rating: 5 out of 5 stars5/5Principles: Life and Work Rating: 4 out of 5 stars4/5
Reviews for Managing Downside Risk in Financial Markets
Rating: 3 out of 5 stars
3/5
1 rating0 reviews
Book preview
Managing Downside Risk in Financial Markets - Frank A. Sortino
Enjoying the preview?
Page 1 of 1