SUMMARY

Edited by Bernd Scherer, the leading expert in the portfolio management field, this collection of technical papers on this complex area is the second book in the new Cutting Edge series.

The last decade saw a gradual narrowing between the buy side (asset management) and sell side (investment banking and in particular sales and trading). Risk magazine has been at the forefront of this development. Contributions from leading practitioners and academics have shaped the industry with three areas of main focus that have automatically evolved:
• view generation;
• portfolio construction and risk budgeting;
• risk management and performance measurement.

Each of the above identifies a distinct step in the portfolio management process. The selection of papers will allow readers to see how academic thinking has developed; how market applications and practitioner usage has evolved and how things might develop in the future.

Portfolio Management will enable you to implement more effective risk management strategies within your business and it will serve as an excellent guide and ideas generator.

Risk Books Cutting Edge series:
The Risk Books Cutting Edge Series is a new series that presents key technical papers drawn from the Cutting Edge section of Risk, the world's leading financial risk management magazine. Each volume provides an introduction from an industry expert, and explores how academic thinking has developed over the years, how market applications and practitioner usage has evolved, and future developments in the field.

Also available in the Risk Books Cutting Edge series:

Theory and Practice of Credit Risk Modelling, introduced by Alexander Lipton

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  TABLE OF CONTENTS

Preface

About the Editor

About the Authors

Introduction
Bernd Scherer

PART I VIEW GENERATION

1. Beyond Black-Litterman: Views on Non-normal Markets
Attilio Meucci

2. Beyond Black-Litterman in Practice
Attilio Meucci

3. The Two-factor Black-Litterman Model
Hari Krishnan; Norman Mains

4. Assessing Views
Gianluca Fusai; Attilio Meucci

PART II PORTFOLIO CONSTRUCTION AND RISK BUDGETING

5. Preparing the Best Risk Budget
Bernd Scherer

6. Core Satellite Investing: Harmony Through Separation
Bernd Scherer

7. Broadening Horizons
Attilio Meucci

8. Hedging of Corporate Pension Liabilities
Bernd Scherer

PART III RISK MANAGEMENT AND RISK-ADJUSTED PERFORMANCE MEASUREMENT

9. Portfolio Skew and Kurtosis
David Buckle

10. VaR for Fund Managers
Stephen Rees

11. Style-based Value-at-Risk for UK Equities
Stephen Rees

12. Risk Contributions from Generic User-defined Factors
Attilio Meucci

13. Understanding Variations in the Risk of Multi-Strategy Portfolios
Gang Jiang; Bob Litterman; Jacob Rosengarten

14. Low Default Portfolios Without Simulation
Tom Wilde and Lee Jackson

15. Sharpe Thinking
Kevin Dowd

16. Generalising Universal Performance Measures
Theofanis Darsinos; Stephen Satchell

17. Omega Portfolio Construction with Johnson Distributions
Alexander Passow

Index

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  AUTHOR BIOGRAPHY

Dr Bernd Scherer is Managing Director and Global Head of Quantitative GTAA Products at Morgan Stanley Investment Management, where he is responsible for the creation of active investment strategies within commodities, foreign exchange, credit and equity markets. Before joining Morgan Stanley he has been Head of Quantitative Research and Head of Portfolio Engineering at Deutsche Asset Management in New York. During his 14-year career in asset management he has held various positions at Morgan Stanley, Oppenheim Investment Management Schroders and JP Morgan Investment Management. Dr Scherer's current research interests focus on signal construction, asset pricing and portfolio optimisation. He has written four books and more than 40 publications in the Journal of Portfolio Management, Financial Analysts Journal, Journal of Investment Management, Risk, Financial Markets and Portfolio Management, Journal of Asset Management etc. Bernd is visiting professor at Birkbeck College and external advisor to the Swiss Finance Institute.

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  CONTRIBUTORS

Attilio Meucci; Hari Krishnan; Norman Mains; Gianluca Fusai; David Buckle; Stephen Rees; Gang Jiang; Bob Litterman; Jacob Rosengarten; Tom Wilde; Lee Jackson; Kevin Dowd; Theofanis Darsinos; Stephen Satchell; Alexander Passow
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