Optimizing Optimization: The Next Generation of Optimization Applications and Theory (Quantitative Finance)

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Staying ahead on downside risk 159


when the same signal is used. An important question is whether it is possible
to limit the downside without sacrificing the upside of portfolio returns. As for
the theory, it would be possible to develop a model in which the objective func-
tion consists of a linear combination of several expectiles. This would allow
the portfolio manager to incorporate his or her preferences on the shape of the
distribution of returns in the asset allocation process.


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