Type
Text
Type
Dissertation
Advisor
Robert Frey | Hu, Jiaqiao | John Pinezich | Tucker, Ann | Peter Djuric.
Date
2010-05-01
Keywords
Applied Mathematics -- Economics, Finance -- Operations Research | Hedge Funds, Liquidity, Lockups, Markov Decision Process, Portfolio Optimization, Regime Switching
Department
Department of Applied Mathematics and Statistics
Language
en_US
Source
This work is sponsored by the Stony Brook University Graduate School in compliance with the requirements for completion of degree.
Identifier
http://hdl.handle.net/11401/70970
Publisher
The Graduate School, Stony Brook University: Stony Brook, NY.
Format
application/pdf
Abstract
Portfolio Selection as introduced by Harry Markowitz laid the foundation for Modern Portfolio Theory. However, the assumption that underlying asset returns follow a Normal Distribution and that investors are indierent to skew and kurtosis is not practically suited for the Hedge Fund environment. Additionally, the Lockup and Notice provisions built into Hedge Fund contracts make portfolio rebalancing dicult and justify the need for dynamic allocation strategies. Market conditions are dynamic, therefore, rebalancing constraints in the face of changing market environments can have a severe impact on return generation. There is a need for sophisticated yet tractable solutions to the multi-period problem of Hedge Fund portfolio construction and rebalancing. In this thesis we Generalize the Hedge Fund asset return distribution to a Multivariate K-mean Gaussian Mixture Distribution; model the multi-period Hedge Fund allocation problem as a Markov Decision Process (MDP); and propose practical rebalancing strategies that represent aconvergence of literature on Hedge Fund investing, Regime Switching, and Dynamic Portfolio Optimization.
Recommended Citation
Cru, David, "Dynamic Hedge Fund Asset Allocation Under Multiple Regimes" (2010). Stony Brook Theses and Dissertations Collection, 2006-2020 (closed to submissions). 178.
https://commons.library.stonybrook.edu/stony-brook-theses-and-dissertations-collection/178