Funds exchange: an approach for risk and portfolio management

Vladimir Cherkassky, Filip Mulier, Anna B. Sheng

Research output: Chapter in Book/Report/Conference proceedingConference contribution

2 Scopus citations

Abstract

This paper describes a new approach for asset allocation and risk management called funds exchange. The funds exchange generically describes short-term trading of (broadly-based) mutual funds or indices based on statistical strategies aimed at achieving improved returns and, at the same time, reducing market risk (i.e., market exposure). Unlike many statistically-based trading and advisory systems trying to predict and benefit from the major (big) changes in the stock market, the funds exchange approach tries to capitalize on the short-term (daily) market volatility, i.e. small daily changes. This paper describes concepts and assumptions underlying this approach, and mathematical formulation of the funds exchange approach as a problem of predictive learning. Finally we show empirical evidence that the proposed approach can indeed provide improved returns and reduce market risk for SP 500 mutual funds.

Original languageEnglish (US)
Title of host publicationIEEE/IAFE Conference on Computational Intelligence for Financial Engineering, Proceedings (CIFEr)
PublisherIEEE
Pages3-7
Number of pages5
ISBN (Print)0780364295
StatePublished - Jan 1 2000
EventIEEE/IAFE/INFORNS 2000: 6th Conference on Computational Intelligence for Financial Engineering (CIFEr) - New York, NY, USA
Duration: Mar 26 2000Mar 28 2000

Publication series

NameIEEE/IAFE Conference on Computational Intelligence for Financial Engineering, Proceedings (CIFEr)

Other

OtherIEEE/IAFE/INFORNS 2000: 6th Conference on Computational Intelligence for Financial Engineering (CIFEr)
CityNew York, NY, USA
Period3/26/003/28/00

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  • Cite this

    Cherkassky, V., Mulier, F., & Sheng, A. B. (2000). Funds exchange: an approach for risk and portfolio management. In IEEE/IAFE Conference on Computational Intelligence for Financial Engineering, Proceedings (CIFEr) (pp. 3-7). (IEEE/IAFE Conference on Computational Intelligence for Financial Engineering, Proceedings (CIFEr)). IEEE.