NEW YORK, April 10, 2012 /PRNewswire/ -- Credit Suisse's Asset Management division announced the release of a new white paper titled "New Normal Investing: Is the (Fat) Tail Wagging Your Portfolio?". Authored by Yogi Thambiah and Nicolo' Foscari, both from the Investment Strategy Americas CIO Office, the paper addresses how investors can adjust risk frameworks to deal with a "New Normal" environment of increasing volatility and low-yielding assets.
The paper—the latest of several recent publications by the authors on the investing challenges in the new-normal environment—focuses primarily on risk-management techniques designed to better incorporate fat-tail risks and potentially minimize portfolio losses.
The paper's highlights and conclusions include:
- In the new normal, fluctuations in risk appetite will be more frequent and portfolio returns will be increasingly derived from the tails;
- As traditional measures of risk based on mean-variance optimization have failed to fully characterize return behavior, incorporating higher moments (i.e., skew and kurtosis) of a return distribution have become increasingly important; and
- Shifting the risk-management framework to accommodate fat-tail events can minimize potential portfolio drawdowns and help protect assets against extremely negative returns.
The authors conclude with a case study showcasing the proposed techniques in action.
For a copy of "New Normal Investing: Is the (Fat) Tail Wagging Your Portfolio?", please contact Katherine Herring at firstname.lastname@example.org or visit the Asset Management site at www.credit-suisse.com.
Credit Suisse AG
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 In mathematics, a moment is a quantitative measure of the shape of a set of points. The first and second moments are denoted by the mean and variance. The third and fourth moments consider skew and kurtosis.
SOURCE Credit Suisse AG