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Managing Downside Risk in Financial Markets Frank A. Sortino (Chairman and Chief Investment Officer, Pension Research Institute)

Managing Downside Risk in Financial Markets By Frank A. Sortino (Chairman and Chief Investment Officer, Pension Research Institute)

Managing Downside Risk in Financial Markets by Frank A. Sortino (Chairman and Chief Investment Officer, Pension Research Institute)


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Summary

Demonstrates how downside-risk can produce better results in performance measurement and asset allocation than variance modeling. This book outlines the major issues for Investment Managers and focuses on 'downside-risk' as a key activity in managing risk in investment/portfolio management.

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Managing Downside Risk in Financial Markets Summary

Managing Downside Risk in Financial Markets by Frank A. Sortino (Chairman and Chief Investment Officer, Pension Research Institute)

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

About Frank A. Sortino (Chairman and Chief Investment Officer, Pension Research Institute)

Dr. Sortino founded the Pension Research Institute in 1981, focusisng on problems facing fiduciaries. He is also Professor of Finance Emeritus at San Francisco State University.He is known internationally for his published research on measuring and managing investment risk and the widely used Sortino Ratio. Stephen Satchell is a Fellow of Trinity College, the Reader in Financial Econometrics at the University of Cambridge and Visiting Professor at Birkbeck College, City University Business School and University of Technology, Sydney. He provides consultancy for a range of city institutions in the broad area of quantitative finance. He has published papers in many journals and has a particular interest in risk.

Table of Contents

List of contributors; Preface; Applications of downside risk - From alpha to omega (Frank A. Sortino); The Dutch view: developing a strategic benchmark in an ALM framework (Robert van der Meer); The consultant/financial planner's view: a new paradigm for advising individual accounts (Sally Atwater); The mathematician's view: modelling uncertainty with the three parameter lognormal (Hal Forsey); A software developer's view: using Post-Modern Portfolio Theory to improve investment performance measurement (Brian M. Rom and Kathleen W. Ferguson); An evaluation of value at risk and the information ratio (for investors concerned with downside risk) (Joseph Messina); A portfolio manager's view of downside risk (Neil Riddles); Underlying theory - Investment risk: a unified approach to upside and downside returns (Leslie A. Balzer); Lower partial-moment capital asset pricing models: a re-examination (Stephen E. Satchell); Preference functions and risk-adjusted performance measures (Auke Plantinga and Sebastiaan de Groot); Building a mean-downside risk portfolio frontier (Gustavo M. de Athayde); FARM: a financial actuarial risk model (Robert S. Clarkson); Appendix: The Forsey-Sortino model tutorial; Index.

Additional information

CIN0750648635G
9780750648639
0750648635
Managing Downside Risk in Financial Markets by Frank A. Sortino (Chairman and Chief Investment Officer, Pension Research Institute)
Used - Good
Hardback
Elsevier Science & Technology
20010920
272
N/A
Book picture is for illustrative purposes only, actual binding, cover or edition may vary.
This is a used book - there is no escaping the fact it has been read by someone else and it will show signs of wear and previous use. Overall we expect it to be in good condition, but if you are not entirely satisfied please get in touch with us

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