Asset allocation process

As opposed to Monte Carlo simulation (dynamic multi period), the resampled efficient frontier and Black-Litterman are both considered static (one period) asset allocation models right? If so, what are other multi period methods? Any others we need to know?

I thought that you can have a dynamic asset allocation considering any of the 3 methods.

yeah except for monte carlo all other 3 are static approaches. I don’t know of any others though.

pop, I just found it later in the notes. They confirm heer’s understanding.

thanks. uffffffffff…

for the BL method, what does this mean, in layman terms…“using a reverse optimization process, analysts back out the equilibrium returns implied by these inputs…” I guess they mean remove systematic risk, so all u have left is the firm specific or unsystematic risk…any insight is appreciated. im getting nervous.

BL is tricky. I think for the exam, a basic understanding of what it does is ok (and why its better than MVO). ---- From what I gather, the process basically examines market weights (based on market cap) and historic correlations between markets to determine total risk and other var/covar params for the ‘traditional’ model. It kind of ‘backsolves’ risk premia to determine what the market ‘says’ the optimal portfolio is. Then, you overlay your investor ‘views’ on that to weight more markets either heavier or lighter than what the ‘backsolved’ equilibrium allocations are. I could be wrong. Peyote. Jack Bauer.

Can we have a dynamic asset allocation without using the Monte Carlo simulation?

deriv108 Wrote: ------------------------------------------------------- > Can we have a dynamic asset allocation without > using the Monte Carlo simulation? It could be possible with a uninvented supersonic mathematic formula, but would take thousandfolds of time of ML, I think.