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Perpetual Tracker with Risk Target

Submitted by cahn on 21 June, 2009 - 5:07pm

Perpetual Tracker with Risk Target ("Perpetual+") is an investment process with the following objectives:

  • Manage the portfolio with a fixed risk target (risk target being defined as the realised volatility)
  • Ensure a certain percentage of the highest reached portfolio value is protected on a perpetual basis

The process is a version of the Time-Invariant Portfolio Insurance ("TIPI") technique and defines the Multiplier (a measure of riskiness of the portfolio) as a function of the realised volatility of the portfolio, reflecting the view that the riskiness of an underlying is not constant.

I have been running a process since 19 May 09 on Hang Seng China Enterprises Index ("HSCEI"). The process switches between the index and the overnight money market depending on

  • The distance between the portfolio and the targeted protection
  • The 30-day realised volatility of the index

Below are the specification of the process:

  • Protection ("BF"): 70% of the highest reached portfolio value ("RPV")
  • Multipler: Min(8, 8 x Vol Target / 30-day Realised Volatility)
  • Vol Target: 15%
  • Rebalance Tolerance: +/-10%
  • Maximum exposure to HSCEI: 240%
  • Minimum exposure to HSCEI: 0%
  • Initial portfolio value: $500,000
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What did I say then?

On Asia: China's different idea of capitalism

Submitted by cahn on 12 July, 2004 - 7:53pm

We should all be grateful to the European Union for adding to the sum of human knowledge on China. As revealed by the FT this week, Brussels has discovered that the People's Republic of China is not yet a market economy.

......By focusing on China's state intervention (a practice European governments know well) or poor corporate governance (presumably an ironic comment in the light of the Ahold and Parmalat scandals), the EU is missing the point.

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