Asset allocation using option-implied moments
This study uses an option-implied distribution as the input in asset allocation. The computation of risk-neutral densities (RND) are based on the Dow Jones Industrial Average (DJIA) index option and its constituents. Since the RNDs estimation does not incorporate risk premium, the conversion of RND...
| Main Authors: | , , |
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| Format: | Proceeding Paper |
| Language: | English English |
| Published: |
Institute of Physics Publishing
2017
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| Subjects: | |
| Online Access: | http://irep.iium.edu.my/57990/ http://irep.iium.edu.my/57990/17/57990_Asset%20allocation.pdf http://irep.iium.edu.my/57990/23/57990_Asset%20allocation_SCOPUS.pdf |
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| author | Bahaludin, Hafizah Abdullah, Mimi Hafizah Tolos, Siti Marponga |
| author_facet | Bahaludin, Hafizah Abdullah, Mimi Hafizah Tolos, Siti Marponga |
| author_sort | Bahaludin, Hafizah |
| building | IIUM Repository |
| collection | Online Access |
| description | This study uses an option-implied distribution as the input in asset allocation. The computation of risk-neutral densities (RND) are based on the Dow Jones Industrial Average (DJIA) index option and its constituents. Since the RNDs estimation does not incorporate risk premium, the conversion of RND into risk-world density (RWD) is required. The RWD is obtained through parametric calibration using the beta distributions. The mean, volatility, and covariance are then calculated to construct the portfolio. The performance of the portfolio is evaluated by using portfolio volatility and Sharpe ratio. |
| first_indexed | 2025-11-14T16:46:41Z |
| format | Proceeding Paper |
| id | iium-57990 |
| institution | International Islamic University Malaysia |
| institution_category | Local University |
| language | English English |
| last_indexed | 2025-11-14T16:46:41Z |
| publishDate | 2017 |
| publisher | Institute of Physics Publishing |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | iium-579902019-10-09T00:55:43Z http://irep.iium.edu.my/57990/ Asset allocation using option-implied moments Bahaludin, Hafizah Abdullah, Mimi Hafizah Tolos, Siti Marponga QA Mathematics This study uses an option-implied distribution as the input in asset allocation. The computation of risk-neutral densities (RND) are based on the Dow Jones Industrial Average (DJIA) index option and its constituents. Since the RNDs estimation does not incorporate risk premium, the conversion of RND into risk-world density (RWD) is required. The RWD is obtained through parametric calibration using the beta distributions. The mean, volatility, and covariance are then calculated to construct the portfolio. The performance of the portfolio is evaluated by using portfolio volatility and Sharpe ratio. Institute of Physics Publishing 2017 Proceeding Paper PeerReviewed application/pdf en http://irep.iium.edu.my/57990/17/57990_Asset%20allocation.pdf application/pdf en http://irep.iium.edu.my/57990/23/57990_Asset%20allocation_SCOPUS.pdf Bahaludin, Hafizah and Abdullah, Mimi Hafizah and Tolos, Siti Marponga (2017) Asset allocation using option-implied moments. In: 1st International Conference on Applied & Industrial Mathematics and Statistics (ICoAIMS 2017), 8-9 Aug 2017, Pahang. http://iopscience.iop.org/article/10.1088/1742-6596/890/1/012158/pdf 10.1088/1742-6596/890/1/012158 |
| spellingShingle | QA Mathematics Bahaludin, Hafizah Abdullah, Mimi Hafizah Tolos, Siti Marponga Asset allocation using option-implied moments |
| title | Asset allocation using option-implied moments |
| title_full | Asset allocation using option-implied moments |
| title_fullStr | Asset allocation using option-implied moments |
| title_full_unstemmed | Asset allocation using option-implied moments |
| title_short | Asset allocation using option-implied moments |
| title_sort | asset allocation using option-implied moments |
| topic | QA Mathematics |
| url | http://irep.iium.edu.my/57990/ http://irep.iium.edu.my/57990/ http://irep.iium.edu.my/57990/ http://irep.iium.edu.my/57990/17/57990_Asset%20allocation.pdf http://irep.iium.edu.my/57990/23/57990_Asset%20allocation_SCOPUS.pdf |