Risk Management for Funds: A Decision Theoretic Approach

摘要

The aim of this paper is to develop an integrated portfolio optimization framework that is consistent with empirically documented investor behaviour as well as market practice in the asset management industry. We develop a top-down approach where risk measures as well as benchmarks of investment funds can be linked to features of behavioural theories such as Prospect Theory. We show how a risk budgeting and risk management process that is consistent with Behavioral Portfolio Theory can be developed.