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ABSTRACT
Successful investing is about generating ideas on the future of financial markets. But it is also about implementing these ideas in portfolios, managing risk, and satisfying investor needs. Dr. Diderich presents tools and techniques to develop investment processes to allow the successful transfer of investment ideas into real performance, that is, positive alpha. The book explains the underlying theoretical concepts and describes how they can be applied in practice. A key focus is put on illustrative real world examples.
Dr. Diderich uses the value chain concept as guiding principle to explain the different value-adding stages of an investment process. The book covers process as well as organization aspects related to generating positive alpha. It focuses on different quantitative and qualitative techniques for forecasting markets and taking investment decisions. The author devotes three chapters to risk management. Portfolio construction algorithms, ranging from the classical Markowitz model to advanced risk budgeting as well as factor model-based approaches, are reviewed and their usage illustrated. A special focus is put on practical implementation aspects, like handing transaction costs and using derivative instruments. As an investment product is only as good as the needs it satisfies, Dr. Diderich presents and compares different investment processes for different types of products ranging from benchmark-oriented portfolios, absolute positive return solutions, capital protection approaches, hedge funds, to liability-driven investing methods. Quality control is related to performance measurement models.
This book shows how an investment manager can provide investment solutions that maximize his or her opportunities along the four dimensions, delivering promised performance, being flexible as well as cost efficient, offering transparency, and providing innovation in order to best satisfy the investor's needs. At the end of the book the reader will be capable of designing or enhancing an investment process for a single or a family of investment products and portfolios from start to finish. The book will be of interest to portfolio managers, investment product designers, quantitative analysts and anyone involved in investment design processes.
TABLE OF CONTENTS
Preface
CHAPTER 1 - Introduction
PART ONE - The Value Chain of Active Investment Management
CHAPTER 2 - Key Success Factors for Generating Positive Alpha
CHAPTER 3 - The Investment Management Value Chain
PART TWO - Forecasting Markets
CHAPTER 4 - Judgmental Approaches for Forecasting Markets
CHAPTER 5 - Quantitative Approaches for Forecasting Markets
CHAPTER 6 - Taking Investment Decisions
PART THREE - Risk Measurement and Management
CHAPTER 7 - Modeling Risk
CHAPTER 8 - Volatility as Risk Measure
CHAPTER 9 - Alternative Risk Measures
PART FOUR - Portfolio Construction
CHAPTER 10 - Single Period Mean-Variance based Portfolio Construction
CHAPTER 11 - Single Period Factor Model based Portfolio Construction
CHAPTER 12 - Dynamic Portfolio Construction
PART FIVE - Portfolio Implementation
CHAPTER 13 - Transaction Costs, Liquidity, and Trading
CHAPTER 14 - Using Derivatives
PART SIX - Investment Products and Solutions
CHAPTER 15 - Benchmark Oriented Solutions
CHAPTER 16 - Absolute Positive Return Solutions
CHAPTER 17 - Capital Protection and Preservation Approaches
CHAPTER 18 - Hedge Funds
CHAPTER 19 - Liability Driven Investing
PART SEVEN - Quality Management
CHAPTER 20 - Investment Performance Measurement
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