Hedging versus Insurance: Long-Horizon Investing with Short-Term Constraints

Romain Deguest, Lionel Martellini, Vincent Milhau: The present publication, “Hedging versus Insurance: Long-Horizon Investing with Short-Term Constraints,” was produced as part of the BNP Paribas Investment Partners research chair at EDHEC-Risk Institute on “ALM and Institutional Investment Management”.

Author(s):

Romain Deguest

Senior research engineer at EDHEC-Risk Institute.

Lionel Martellini

Professor of finance at EDHEC Business School andscientific director of EDHEC-Risk Institute.

Vincent Milhau

Deputy scientific director of EDHEC-Risk Institute.

Under the supervision of Professor Lionel Martellini, Scientific Director of EDHEC-Risk Institute, this chair examines the properties of dynamic asset allocation strategies in asset-liability management. Indeed, this document provides comprehensive insights into all of EDHEC-Risk Institute’s research on dynamic allocation in asset-liability management. The publication builds on these previous findings and illustrates that failing to separate long-term risk-aversion and short-term loss-aversion may lead to poor investment decisions. Relatively simple solutions exist that can be implemented as dynamic asset allocation strategies in order to control shortterm risk levels while maintaining access to long-term sources of performance. These solutions are a substantial improvement over traditional strategies without dynamic risk-control, which inevitably lead to underspending of investors' risk budgets in normal market conditions, with a strong associated opportunity cost, and over-spending of investors' risk budget in extreme market conditions.
Pdf
Hedging versus Insurance: Long-Horizon Investing with Short-Term Constraints...
(-1.00 B)
Type: EDHEC Publication
Date: le 21/03/2013
Extra information : For more information, please contact EDHEC Research and Development Department [ research@drd.edhec.edu ]
Research Cluster : Finance

See Also

EDHEC-Risk and Swiss Life AM France set up a research chair to analyse the role of real estate in investment solutions
News
- 17-10-2018
Swiss Life Asset Managers France and EDHEC-Risk Institute have announced the creation...
Lionel Martellini speaking on the application of goal-based investing to retirement strategies at the TrackInsight European Summit in Paris on Nov 7
News
- 16-10-2018
Lionel Martellini, Professor of Finance, EDHEC Business School and Director, EDHEC-Risk...
The EDHEC Executive MBA rises six places in the Financial Times global ranking 2018
News
- 15-10-2018
The Financial Times published today its latest ranking of top Executive MBA programmes...
News
- 11-10-2018
The EDHEC Family Business Centre and Tharawat Family Business Forum, with the...