Abstract
We study the problem of diversifying a given initial capital over a finite number of investment funds that follow different trading strategies. The investment funds operate in a market where a finite number of underlying assets may be traded over a finite discrete time. Our goal is to find a diversification that is optimal in terms of a given convex risk measure (see e.g. Föllmer and Schied 2004, Chapter 4). We formulate an optimization problem in which a portfolio manager is faced with uncertain asset returns as well as liabilities.
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Hilli, P., Koivu, M., Pennanen, T. (2010). Optimal Construction of a Fund of Funds. In: Berkelaar, A.B., Coche, J., Nyholm, K. (eds) Interest Rate Models, Asset Allocation and Quantitative Techniques for Central Banks and Sovereign Wealth Funds. Palgrave Macmillan, London. https://doi.org/10.1057/9780230251298_11
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DOI: https://doi.org/10.1057/9780230251298_11
Publisher Name: Palgrave Macmillan, London
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