问两个问题

问题如下：

Colleen Finnegan is 32 years old and lives in Ireland. She worked as an equity analyst for 10 years, but lost her job during a recent bear market. Finnegan’s compensation was highly correlated with equity market returns and she expects this will be true for the rest of her working life. She continues to manage her personal portfolio of European equities and bonds, currently valued at 300,000 euros (EUR). Finnegan optimizes and rebalances her portfolio using meanvariance optimization (MVO). Her current allocation is 70% equities and 30% fixed income, including cash. In managing her portfolio, she has been dissatisfied with the frequency of rebalancing required and the amount of transaction costs incurred.

Finnegan has a variable-rate mortgage on her home. If she fails to make her mortgage payments for three months, she risks losing her home. Finnegan does not want to sell assets in her investment portfolio to pay her monthly mortgage payments. She hopes to find a new job before her cash is depleted. Because she is unemployed, her effective tax rate is currently very low, but will increase significantly once she finds a new job.

Finnegan seeks advice on her asset allocation approach from Seamus Welch, a portfolio manager with her former employer. Finnegan tells Welch that she had above-average risk tolerance while she was employed. She now thinks she has below-average risk tolerance until she finds a new job. She also explains that if she starts a new job within the year, she intends to make a deposit of EUR 30,000 on a home for her physically disabled sister. This deposit would be funded by liquidating some assets. Finnegan tells Welch that, as an analyst, she covered European clothing retailers. She continues to maintain a positive view on many firms in this sector and she would like to incorporate these views into her investment strategy.

Welch suggests to Finnegan that, based on her circumstances, the standard MVO process can be improved upon by using a resampled efficient frontier, the Black-Litterman approach, or a Monte Carlo simulation.

A. Explain, compared to the standard MVO process, and based on Finnegan’s circumstances:

i. two advantages of using a resampled efficient frontier.

ii. one advantage of using the Black-Litterman approach.

iii. two advantages of using a Monte Carlo simulation.

选项：

解释：

i. Advantages of using a resampled efficient frontier:

The resampled efficient frontier approach generates portfolios that are more stable through time than those derived using standard mean-variance optimization (MVO). Finnegan stated that she was dissatisfied with the high level of turnover and transaction costs she incurred in her portfolio using standard MVO. A portfolio that is more stable would reduce turnover and transaction costs, and be more appropriate for Finnegan.

The resampled efficient frontier approach generates portfolios that are more diversified than those derived using standard MVO. Finnegan stated that she has below-average risk tolerance until she finds a new job. A more diversified portfolio should be less volatile, meeting Finnegan’s lower risk tolerance requirement.

ii. Advantages of using the Black-Litterman approach:

The Black-Litterman (BL) approach incorporates the investor’s views. Finnegan has a positive view of the European retail clothing sector. The BL approach allows her to incorporate these views, while standard MVO does not.

The BL approach generates portfolios that are more diversified than those derived using standard MVO. Finnegan stated that she has below-average risk tolerance until she finds a new job. A more diversified portfolio should be less volatile, meeting Finnegan’s lower risk tolerance requirement.

iii. Advantages of using a Monte-Carlo simulation:

Monte Carlo simulations allow for portfolio rebalancing under changing tax rates and in multi-period situations. Finnegan’s effective tax rate will likely increase sharply when she starts a new job. MVO does not consider these factors.

Monte Carlo simulations can compute path-dependent terminal wealth. Finnegan hopes to make a deposit on a home for her sister within the year, provided she finds a new job. Cash flows in and out of a portfolio and the sequence of returns will have a material effect on terminal wealth – this is termed path-dependent. In Finnegan’s case, the deposit would be a significant cash outflow, resulting in lower terminal wealth.