Chapter 13

Portfolio Allocation

Yohan Chalabi

ETH Zuürich Zürich,Switzerland

Diethelm Wiirtz

ETH Zurich Zurich,Switzerland

13.1 Introduction

Nobel Laureate Harry H. Markowitz provided one of the first formulations of portfolio allo­cation as an optimization problem (Markowitz (1952)); since then, portfolio allocation has been widely studied and numerous models have been introduced, although the underlying concepts have remained the same. As summarized by Meucci (2009), portfolio allocation can be viewed as a method of maximizing the degree of satisfaction of the investor. For ex­ample, one investor might seek a portfolio that minimizes risk represented by a covariance estimator of the daily returns on assets, whereas another might consider risk ...

Get Computational Actuarial Science with R now with the O’Reilly learning platform.

O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.

Start your free trial