Monte-Carlo Estimations of the Downside Risk of Derivative Portfolios

Leoni, Patrick (2007) Monte-Carlo Estimations of the Downside Risk of Derivative Portfolios. UNSPECIFIED. (Unpublished)

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We simulate the performance of a standard derivatives portfolio to evaluate the relevance of benchmarking in terms of doenside risk reduction. The simulation shows that benchmarking always leads to significantly more servere losses in average than those generated by letting the portfolio reach the end of a given horizon. Moreover, switching from a 0-correlation across underlyings to a very mild form of correclation significantly increased the probability of reaching the downside benchmark before maturity, whereas aadding more correlation does not significantly increase this figure.

Item Type: Other
Additional Information: Department of Economics Working paper Series 1760607
Keywords: Derivatives; Portfolio management; Benchmarking; Downside risk; Monte-Carlo simulations
Academic Unit: Faculty of Social Sciences > Economics, Finance and Accounting
Item ID: 567
Depositing User: Ms Sandra Doherty
Date Deposited: 19 Jun 2007
Refereed: No

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