Project With Jean-Fran莽ois B茅gin
A Simulation-Based Approach to Asset Allocation
The portfolio choice problem is the process of allocating one's wealth to various financial assets in such a way as to optimize some criterion (e.g., a utility function).
In a seminal paper, Brandt, Goyal, Santa-Clara, and Stroud (2005) propose the use of a simulation-based method for solving practical discrete-time portfolio choice problems. The authors argue that their method allows for non-standard preferences and many assets with arbitrary return distribution. This project investigates this method and compares it to other well-known solutions. The student will be responsible for the following, among others:
- Familiarizing themselves with the literature on asset allocation.
- Understanding the framework of Brandt, Goyal, Santa-Clara, and Stroud.
- Writing code to implement the method.
- Extracting data from commonly used datasets.
- Applying the method to realistic scenarios and comparing it with other asset allocation methods.
- Documenting all work.