IDEAS home Printed from https://ideas.repec.org/h/wsi/wschap/9789814280112_0007.html
   My bibliography  Save this book chapter

Asset Allocation With Credit Instruments

In: Alternative Investments And Strategies

Author

Listed:
  • BARBARA MENZINGER

    (risklab GmbH, Seidlstr. 24-24a, 80335 Munich, Germany)

  • ANNA SCHLÖSSER

    (risklab GmbH, Seidlstr. 24-24a, 80335 Munich, Germany)

  • RUDI ZAGST

    (HVB-Stiftungsinstitut für Finanzmathematik, Technische Universität München, Parkring II, 85748 Garching, Germany)

Abstract

This chapter presents a consistent, scenario-based asset allocation framework for analyzing traditional financial instruments and credit instruments in a portfolio context. Our framework accounts for the distinct return characteristics of credit instruments by incorporating potential defaults into the total return calculation. We generate correlated default times with a Normal Inverse Gaussian one-factor copula. To determine optimal portfolios, we use a mean-variance and a conditional value at risk optimization. Performing a case study for the U.S. market, we find that the mean-variance optimization overestimates the benefits of low-rated credit instruments. Though, optimal portfolios always contain a considerable proportion of credit instruments.

Suggested Citation

  • Barbara Menzinger & Anna Schlösser & Rudi Zagst, 2010. "Asset Allocation With Credit Instruments," World Scientific Book Chapters, in: Rüdiger Kiesel & Matthias Scherer & Rudi Zagst (ed.), Alternative Investments And Strategies, chapter 7, pages 147-173, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814280112_0007
    as

    Download full text from publisher

    File URL: https://www.worldscientific.com/doi/pdf/10.1142/9789814280112_0007
    Download Restriction: Ebook Access is available upon purchase.
    File URL: https://www.worldscientific.com/doi/abs/10.1142/9789814280112_0007
    Download Restriction: Ebook Access is available upon purchase.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:wschap:9789814280112_0007. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscientific.com/page/worldscibooks .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.