The Effectiveness of the Asset Allocation Using the Technique of Simulation Optimization

• Main Author: 劉婉玉
• Other Authors: 蔡政憲
• Format: Others
• Language: en_US
• Published: 2006
• Online Access: http://ndltd.ncl.edu.tw/handle/50516296280484716378

碩士 === 國立政治大學 === 風險管理與保險研究所 === 94 === This paper applied simulation optimization technique to search for the optimal asset allocation. Simulation optimization is the process of determining the values of the decision variables that optimize the values of the stochastic response variable generated from a simulation model. The decision variables in our case are the allocations of many kinds of assets. The response variable is a function of the expected wealth and the associated risk. The simulation optimization problem can be characterized as a stochastic search over a feasible exploration region. The method we applied is the evolution strategies and the optimization problem is formulated as a multi-period one with short-sale constraints. In order to verify the effectiveness of simulation optimization, we compared the resulting asset allocation with allocations obtaining using traditional portfolio insurance strategies including Buy-and-Hold, Constant Mix, Constant Proportion Portfolio Insurance, and Time-Invariant Portfolio Protection. We also used many indexes to evaluate performance of all kinds of strategies in this paper. Our empirical results indicated that using simulation optimization to search for the best asset allocation resulted in large volatilities, however, it significantly enhanced rate of return. As a whole, applying simulation optimization indeed gets the better performance, increases the final wealth, makes Sharpe Index large, and obtains the higher return under per unit risk.