Let's say you are on a quantitative wealth advisory team at an investment bank in the United
Question:
Let's say you are on a quantitative wealth advisory team at an investment bank in the United States. Your bank agrees with J.P. Morgan's assumptions about risk, returns and correlations. Your supervisor wants to analyze the following three questions:
Identify three asset classes that tend to have higher risk-adjusted returns over the next two years, such as the Sharpe ratio. The correlation of these three selected asset classes should not be higher than 0.6.
A client is a family office that wants to invest in a portfolio of stocks and bonds and hopes to achieve a portfolio return of greater than 10% and a portfolio risk of less than 8%. How would you structure the portfolio for this client?
Aggressive clients can borrow U.S. dollar funds from your investment bank at an interest cost of 8% per year. He hopes to build a leveraged portfolio with an expected portfolio return higher than 25% and an expected volatility no higher than 30%. How would you structure the portfolio for this client?
Management
ISBN: 9780730329534
6th Asia Pacific Edition
Authors: Schermerhorn, John, Davidson, Paul, Factor, Aharon, Woods, Peter, Simon, Alan, McBarron, Ellen