Portfolio Management Model Research Articles

How the Default Probability is Defined by the Credit Portfolio Models: A Comparative Analysis between the Theoretical Structural Models?

This paper is elaborate of which the main is to present a theoretical analysis between the structural models. There are currently three types of models to consider the risk of credit: the structural models (The KMV Moody’s model and the CreditMetrics model) also defined by the models of the value of the firm, reduced form models also defined by models with intensity (actuarial models) and the econometric models (The macro-factors models). The development of its three types of models is based on a theoretical basis developed by several researchers and many financial institutions. These models are dedicated to measurement the default probability of credit portfolio. The evaluation of their default frequencies and the size of the credit portfolio are expressed as functions of macro-economic and micro-economic conditions as well as unobservable credit risk factors, which explained by other factors. We developed three sections to explain the different characteristics of the structural models of credit portfolio management. The purpose of all its models is to express the probability of default.

Processo de seleção de projetos na gestão de portfólio: o caso de uma organização sem fins lucrativos

Nonprofit organizations are increasing their participation in society and are also pursuing tools that facilitate the management leadership and control of their work routines, in the Administration area of knowledge. These organizations also present the adoption of strategic planning techniques, which happens to make the acceptance of the project portfolio management methodology a natural consequence. Based on this context, the goal of this paper is to verify a Specialized Medical Association’s the practices developed in selecting projects, by using models of project portfolio management. Through an exploratory case study as a research strategy and qualitative evaluation technique, we conclude that the organization develops strategic planning for fundraising and partially and informally applies the process of selecting projects for portfolio composition. The analysis in the light of the four models, identified that there is a model applicable to the case studied, but some of these phases are adherent, and other hard to fit the context of nonprofit organizations. Finally, the conclusion motivates reflection and expectation on the need to develop methodologies applied to the nonprofit sector that contemplates the characteristics and peculiarities of these organizations.

Processo de seleção de projetos na gestão de portfólio: o caso de uma organização sem fins lucrativos

Nonprofit organizations are increasing their participation in society and are also pursuing tools that facilitate the management leadership and control of their work routines, in the Administration area of knowledge. These organizations also present the adoption of strategic planning techniques, which happens to make the acceptance of the project portfolio management methodology a natural consequence. Based on this context, the goal of this paper is to verify a Specialized Medical Association’s the practices developed in selecting projects, by using models of project portfolio management. Through an exploratory case study as a research strategy and qualitative evaluation technique, we conclude that the organization develops strategic planning for fundraising and partially and informally applies the process of selecting projects for portfolio composition. The analysis in the light of the four models, identified that there is a model applicable to the case studied, but some of these phases are adherent, and other hard to fit the context of nonprofit organizations. Finally, the conclusion motivates reflection and expectation on the need to develop methodologies applied to the nonprofit sector that contemplates the characteristics and peculiarities of these organizations.

The Predictability of Managerial Heterogeneities in Mutual Funds

We empirically assess the role of managerial heterogeneities in mutual fund performance. Using a sample of Chinese mutual funds with relatively high managerial turnover rates, we follow the method in Abowd, Kramarz and Margolis (1999) to explicitly estimate the time-invariant heterogeneities among fund managers. We find that funds with higher manager fixed effects outperform those with lower manager fixed effects by 2% per year. We also find that fund performance improves after managers with higher fixed effects are hired. The results are consistent with the notion that manager fixed effects are associated with managerial innate ability or human capital, which in turn leads to better performance. Finally, we find that investors pay special attentions to these managerial attributes above and beyond the traditional performance measures, which provides some valid empirical evidence to the rational model of active portfolio management as in Berk and Green (2004).

Reputational Concerns and Price Comovements

We analyze the rational expectation equilibria of a delegated portfolio management model in which two risky assets have completely independent returns and liquidity shocks. Some managers have perfect information on the assets' returns while others are uninformed and try to infer information from the prices. We show that, as long as some reasonable assumptions on the nature of the equilibrium are imposed, in a rational expectations equilibrium there is always a set of realizations of the shocks such that the returns are not revealed. In this region the prices of the two assets exhibit a strong form of comovement, as they must be identical. This occurs despite the fact that the two assets have different ex ante probabilities of repayment.

Optimal and investable portfolios: An empirical analysis with scenario optimization algorithms under crisis market prospects

This paper develops scenario optimization algorithms for the assessment of investable financial portfolios under crisis market outlooks. To this end, this research study examines from portfolio managers' standpoint the performance of optimum and investable portfolios subject to applying meaningful financial and operational constraints as a result of a financial turmoil. Specifically, the paper tests a number of alternative scenarios considering both long-only and long and short-sales positions subject to minimizing the Liquidity-Adjusted Value-at-Risk (LVaR) and various financial and operational constraints such as target expected return, portfolio trading volume, close-out periods and portfolio weights. Robust optimization algorithms to set coherent asset allocations for investment management industries in emerging markets and particularly in Gulf Cooperation Council (GCC) financial markets are developed. The results show that the obtained investable portfolios lie off the efficient frontier, but that long-only portfolios appear to lie much closer to the frontier than portfolios including both long and short-sales positions. The proposed optimization algorithms can be useful in developing enterprise-wide portfolio management models in light of the aftermaths of the most-recent financial crisis. The developed methodology and risk optimization algorithms can aid in advancing portfolio management practices in emerging markets and predominantly in the wake of the latest credit crunch.

Variations on a Theme: The Shift From Distinction to Commonality in Philadelphia's Diverse Provider Model 2002–2008

Recent years have seen a growing push toward Portfolio Management Models that incorporate a variety of “providers” operating public schools. One rationale for this is that such organizations can offer distinct and innovative educational practices. This article describes the Diverse Provider Model implemented in Philadelphia from 2002–2008, and the shifts in practices by many outside providers away from distinction and toward alignment with the district approach. Drawing on institutional theory, we examine possible explanations for these shifts, including the particular structures and incentives in Philadelphia and discuss what can be learned about the prospects for innovation through outside providers.

A model for sustainable corporate real estate portfolio management

These days, corporations commit to sustainable development with increasing frequency. Besides idealistic motives, the movement is strengthened by the growing awareness that sustainability aspects contribute to corporate opportunities and thus competitive advantages of private and public companies. In order to remain competitive, companies therefore need to focus on sustainability too. In reaction to this, corporations that do not just want to do ‘green washing’ launch initiatives, recruit new employees as experts for sustainability, and implement working groups in order to drive forward sustainability in their business. Recent developments in the field of sustainability have also forced corporate real estate management (CREM) into improving the sustainability of their real estate portfolio. This paper gives an overview of how the portfolio management of large, non-property companies can be supplemented by sustainability considerations and makes a proposal for a portfolio management approach.

Gestão de portfólio de projetos: contribuições e tendências da literatura

A necessidade crescente de melhores resultados com recursos cada vez mais escassos requer que as empresas selecionem e invistam apenas nos projetos capazes de gerar vantagem competitiva. O fato de este processo de seleção envolver interesses e riscos, uma efetiva gestão de portfólio de projetos pode fornecer suporte de forma estruturada e organizada. Este trabalho tem como objetivo traçar um panorama da literatura acadêmica em gestão de portfólio de projetos, descrevendo tendências e os principais temas abordados. A abordagem metodológica utilizada foi de revisão bibliográfica, adotando técnicas de análise bibliométricas e de análise de conteúdo. As buscas foram realizadas na base científica de dados ISI Web of Knowledge e na base Scielo. A amostra inicial de análise foi composta por 85 artigos publicados entre 1994 e 2009, expandida para as referências citadas nesses artigos. A amostra foi analisada com relação à evolução das publicações e citações, identificação dos principais periódicos, autores e obras, bem como os temas principais abordados. Os resultados indicam um significativo aumento de artigos publicados e citações ao longo do período. Os modelos de gestão de portfólio identificados na literatura convergem para os seguintes processos-chave: propostas de projetos; direcionadores estratégicos; identificação; avaliação; seleção; priorização; alocação de recursos; e monitoramento & controle. As ferramentas mais citadas nos estudos da amostra foram classificadas em três grupos: métodos financeiros, programação matemática e modelos estatísticos. Finalmente, os critérios para seleção dos portfólios que se destacaram foram: o potencial de mercado, viabilidade econômico-financeira e riscos/incertezas.

Credit portfolio management using two-level particle swarm optimization

In this paper, we propose a novel Two-level Particle Swarm Optimization (TLPSO) to solve the credit portfolio management problem. A two-date credit portfolio management model is considered. The objective of the manager is to minimize the maximum expected loss of the portfolio subject to a given consulting budget constraint. The captured problem is very challenging due to its hierarchical structure and its time complexity, so the TLPSO is designed for the credit portfolio management model. The TLPSO has two searching processes, namely, “internal-search”, the searching process of the maximization problem and “external-search”, the searching process of the minimization problem. The performance of TLPSO is then compared with both the Genetic Algorithm (GA) and the Particle Swarm Optimization (PSO), in terms of efficient frontiers, fitness values, convergence rates, computational time consumption and reliability. The experiment results show that TLPSO is more efficient and reliable for the credit portfolio management problem than the other tested methods.

Multiagent model of investment portfolio

The agent based simulation model of investment portfolio analysis and management is considered

Dynamic optimal capital growth with risk constraints

In this paper, risk metrics in capital growth and drawdown as a financial risk measure were considered. Moreover, we developed a dynamic portfolio management model with constraints on the maximal drawdown. Exact optimization algorithms run into difficulties in this framework and this motivates the investigation of simulated annealing optimized algorithm to solve the problem of maximizing long term growth of simultaneous risky investment. Empirical research indicates that the approach is inspiring for this class of portfolio optimization problems.

A non-linear programming model for insurance company investment portfolio management in Nigeria

As the crucial mainstay for insurance industry to survive and develop, the insurance investment enables insurance companies to offset their possible underwriting losses and make a considerable profit. There have been many issues that affect the investment of Nigeria insurance companies. These include lack of investment vehicles, low rate of return on investment, unstable policies from the regulators and irrational investment portfolio. All these factors combined have restricted the development of Nigeria insurance industry. This study combined an 'expanded Lagrangian' function with a modified trust region method to propose a method for solving investment portfolio management problems of insurance companies. The proposed method was implemented on the portfolio management problems of a group of insurance companies. The study offers alternative solution to portfolio investment management by implementing best processes for minimising the risk for a given expected return, which is generally a non-linear function. It devised a means of asset allocation among a number of investment opportunities in achieving the investment objectives of insurance companies.

Model of planning and monitoring of operation projects portfolio

Taking into account variable problems, originating from practices of fulfilling of operation projects portfolio in different companies, there is the great necessity in elaboration and implementation of the model of operation projects portfolio management. This model must include decision of the following problems. Mutual relation of project parameters with each other and with the external environment on project and portfolio levels during their planning. Mechanism of monitoring of projects portfolio, including assessment of risk events probabilities and dynamics of risk decrease in time extent. Mechanism of motivation of an organization departments, which fulfill an operation projects portfolio. All of these tasks have been reached in the article. This research has shown new views and characteristics of the main project portfolio management processes: prioritizing, balancing, monitoring. The most significant of them are the following. Close combining of calendar – grid planning and scenario approach. Due to these, there appeared new contents of project portfolio scenarios. For example, setting relations between projects and their priority in a portfolio through fulfilling the requirement of minimizing of a company’s current budget change, by means of compensational changes in start terms of project’s work packs

UNCERTAIN CONTEXT FACTORS IN ERP PROJECT ESTIMATION ARE AN ASSET: INSIGHTS FROM A SEMI-REPLICATION CASE STUDY IN A FINANCIAL SERVICES FIRM

This paper reports on the findings of a case study in a company in the financial services sector in which we replicated the use of a previously published approach to systematically balance the contextual uncertainties in the estimation of Enterprise Resource Planning (ERP) projects. The approach is based on using three techniques, a parametric model, namely COCOMO II, a portfolio management model, and Monte Carlo simulations. We investigated (i) whether the adjustment of uncertain cost drivers in the COCOMO II model increases the chance of project success in a portfolio of ERP projects, (ii) which cost drivers of the COCOMO II model can be adjusted in a way that maximized the chance of portfolio success under time constraints, and (iii) which cost drivers of the COCOMO II model can be adjusted in a way that maximized the chance of portfolio success under effort constraints. We found that 11 COCOMO II cost drivers can be changed so that the change impacts the project outcomes under both time and effort constraints. This result is different from the result in the first case study in which 13 such factors were found.

Decision-making process for project portfolio management

The purpose of this paper is a quantitative study of the risk surrounding the main problem of investment decision making in project portfolio selection. The primary objective is to provide managers with a decision support tool allowing them to choose carefully their investment strategies and reduce risk of failure. The developed computer model consists of three major modules. The first module calculates projects cash-flow using a deterministic method. The second module calculates expected after tax net cash flows and estimates performance indicators for each realisation, thus yielding distribution of return for each project. The third module selects a set of projects (portfolio) using their covariance and semi-covariance matrix. In summary, we will define a selection model for portfolio management of investment projects that will not only take into account risk, but also the effect of the interdependence of projects. The model will be applied to a portfolio of projects in petroleum upstream.

A game theory-based model for product portfolio management in a competitive market

In today’s competitive markets, effective product portfolio is critical for manufacturers that offer several products. From manufacturers’ perspective, the diversity must be maintained in a level in which the engineering costs do not exceed the acquired advantages of increased market share. On the other hand, product portfolio diversity is prominent for customers. In addition, manufacturers should always be careful about competitors activity. Therefore, we consider the problem of product portfolio management (PPM) in a competitive environment. This paper constructs a game theory-based mathematical model to deal with this new PPM problem. In this presented mathematical model, the PPM problem is formulated as a 2-person non-cooperative game with complete information. Each player has a set of strategies which correspond to the feasible product portfolios. Every payoff is determined by the procedure that considers the customer–engineering interaction in product portfolio planning, which aims to optimize product portfolio for a target market segment, and proposed a maximizing surplus share model for it. Therefore, obtaining the optimal product portfolio is determined by the Nash equilibrium point of this game. Finally, a numerical example is presented to demonstrate the feasibility of the approach.

Samsung card lending model

Samsung Card Lending Model (SCLM) analyzes cash flow in individual accounts and measures the level of company-wide risk. Serving as a risk and portfolio management model in the consumer lending business, the main features of SCLM are as follows. Default ratios such as intrinsic balance default probability and annual default ratio are computed using the past, present, and future cash flows of accounts. The provision is shown as the total sum of write-offs. The size of capital required is determined by default probability distribution. The price for new accounts is quoted based on cash flow simulations reflecting future business environments. SCLM has shown good performance in Samsung card consumer lending business since the Korean credit card crisis of 2003.

Combining industrial buyer and seller strategies for international supply and marketing management

PurposeThe purpose of this paper is to review international industrial purchasing and marketing literature with a focus on portfolio models, to develop portfolio models for buyers' and sellers' international strategies, and to combine the models so that both the buyer and seller perspectives are dealt with simultaneously.Design/methodology/approachLiterature on international industrial purchasing and marketing is discussed. Dimensions that are important for the buyers' and sellers' strategies are identified. Portfolio models for buyers and sellers are developed and the two perspectives are matched together.FindingsThe paper contributes a specification of features that are important for industrial buyers' and sellers' international purchasing and marketing strategies. These dimensions are used to develop a model of supplier relationship management and a marketing management model for supplier strategies. The consequences for the firm's international activities are discussed. A model combining industrial buyers' and sellers' international supply and marketing management strategies is developed.Research limitations/implicationsThis paper provides a deeper understanding of international exchange processes by combining literature on international industrial purchasing and international marketing. Situations are identified where different areas of theory are applicable. The paper also contributes to the discussion on what should be the conceptual domain of international business. Here, it is argued that international exchange is the product of joint decisions made by two or more actors based in different countries. Earlier academic literature reveals a striking imbalance: while one side of the coin – the exporter side – has been extensively studied, the importer side has largely been neglected. In this paper, it is tried to present a balanced view of both sides.Practical implicationsThis paper introduces portfolio management models that can be used for both industrial purchasing and marketing management. The paper stresses the importance of finding a fit between the marketing and purchasing strategies within a relationship. If both parties have positioned the relationship in a similar way, there are much greater possibilities for the relationship to create value for both parties.Originality/valueThe paper combines international industrial purchasing and international marketing perspectives as few studies have done before.

The Black–Litterman Model for Active Portfolio Management

Portfolio optimization presents a challenge to investors through the tendency of small differences in expected return inputs to create major swings in portfolio weightings, sometimes leading to extreme portfolio allocations. The authors believe that the Black–Litterman (BL) model can play a highly constructive role in alleviating this problem for investors, because the model combines active investment views and equilibrium views through a Bayesian approach. So that investors can fully exploit this important investment model, the authors discuss the development of the BL model within the mean-variance portfolio efficiency paradigm, examine the phenomenon of unintentional trades and additional risks related to the traditional implementation of BL in active portfolio management, and propose a potential remedy that leads to portable alpha implementation of active portfolios. <b>TOPICS:</b>Portfolio construction, statistical methods, in markets