Abstract
This chapter discusses techniques for decision making in the presence of risk such as evaluating corporate restructuring strategies under uncertainty. In particular, we discuss asset allocation and restructuring, risk budgeting, and stress testing. We present techniques based on real-world data to construct multi-asset class portfolios and provide techniques to minimize risk, manage factor exposure, and maximize alpha. This chapter relies heavily on techniques presented earlier in the book, and incorporates Monte Carlo simulations and stochastic optimization as a means to uncover potential extreme movements. A comprehensive stochastic optimization case reinforces chapter concepts.
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