Martingale Risk
Asset allocation is the process whereby an investor decides how to invest money achieving the
right balance between risk and return. Relying on our proprietary technology we find the minimum
risk portfolio under a set of flexible constraints given a target return demanded by our client. Our
asset allocation methodology can handle different risk measures such as portfolio return
volatility, Value-at-Risk, expected shortfall, portfolio convexity and negative skewness.
Consider the following example: one of our clients asked us to find the optimal allocation for our
£200 mln portfolio, under the constraints that all the securities be AA-BBB rated, 50% of them be
ECB eligible and the portfolio duration be less than 5 years. We delivered the optimal portfolio
weights and performed stress test analysis to make our clients aware about possible risks they
did not think of.
We use our proprietary and internally developed multi-factor model to identify and measure the
sources of risk affecting a portfolio of securities. First of all, we use statistical analysis to identify
the main sources of uncertainty for a given set of financial variables. Then, we estimate the
correlations among these factors and calculate the portfolio sensitivities to them. Finally we
stress the portfolio returns by bumping the relevant risk factors according to historical and what-if
scenarios.
right balance between risk and return. Relying on our proprietary technology we find the minimum
risk portfolio under a set of flexible constraints given a target return demanded by our client. Our
asset allocation methodology can handle different risk measures such as portfolio return
volatility, Value-at-Risk, expected shortfall, portfolio convexity and negative skewness.
Consider the following example: one of our clients asked us to find the optimal allocation for our
£200 mln portfolio, under the constraints that all the securities be AA-BBB rated, 50% of them be
ECB eligible and the portfolio duration be less than 5 years. We delivered the optimal portfolio
weights and performed stress test analysis to make our clients aware about possible risks they
did not think of.
We use our proprietary and internally developed multi-factor model to identify and measure the
sources of risk affecting a portfolio of securities. First of all, we use statistical analysis to identify
the main sources of uncertainty for a given set of financial variables. Then, we estimate the
correlations among these factors and calculate the portfolio sensitivities to them. Finally we
stress the portfolio returns by bumping the relevant risk factors according to historical and what-if
scenarios.
Portfolio Management Methodologies
Some typical Portfolio Allocation services we provide:
Portfolio management and asset allocation. Under a wide set of flexible constraints matching
the portfolio managers’ investment needs, we deliver sophisticated analytics to solve virtually any
investment decision problem. We manage portfolios that mix cash, vanilla and exotic derivatives.
Performance assessment and monitoring. Although it is possible to find good performers for
specific asset classes, few investment firms show high level of proficiency across all financial
markets. The purpose of the manager selection process is to identify those investment houses
most likely to excel for a given mandate.
Portfolio quantitative analysis. Macroeconomic scenario analysis, stress testing, Value at Risk,
marginal asset performance and volatility contribution, portfolio return skewness and kurtosis
analysis.
Portfolio management and asset allocation. Under a wide set of flexible constraints matching
the portfolio managers’ investment needs, we deliver sophisticated analytics to solve virtually any
investment decision problem. We manage portfolios that mix cash, vanilla and exotic derivatives.
Performance assessment and monitoring. Although it is possible to find good performers for
specific asset classes, few investment firms show high level of proficiency across all financial
markets. The purpose of the manager selection process is to identify those investment houses
most likely to excel for a given mandate.
Portfolio quantitative analysis. Macroeconomic scenario analysis, stress testing, Value at Risk,
marginal asset performance and volatility contribution, portfolio return skewness and kurtosis
analysis.
“Portfolio diversification is the only real free-lunch in financial markets”
"It's not that I am smart, it's just that I stay with problems
longer." Albert Einstein
longer." Albert Einstein
| Registered Office: 6-7 Ludgate Square, London EC4M 7AS UK Martingale Risk Ltd © 2007 |
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