Risk and Asset Allocation (Springer Finance)
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Review
From the reviews: This exciting new book takes a fresh look at asset allocation and offers up a masterly account of this important subject. The quantitative emphasis and included MATLAB software make it a must-read for the mathematically oriented investment professional. Peter Carr, Head of Quantitative Research, Bloomberg LP, Director of Masters in Mathematical Finance program, NYU Meucci’s Risk and Asset Allocation is one of those rare books that takes a completely fresh look at a well-studied problem, optimal financial portfolio allocation based on statistically estimated models of risk and expected return. Designed for graduate students or quantitatively oriented asset managers, Meucci provides a sophisticated and integrated treatment, from investment theory, to optimization methods, to statistical analysis of multi-variate return data, through computational implementation of the results. This is rigorous and relevant! Darrel Duffie, Professor of Graduate Business School, Stanford University A wonderful book! Mathematically rigorous and yet practical, heavily illustrated with graphs and worked examples, Attilio Meucci has written a comprehensive treatment of asset allocation starting from statistical concepts, covering investment primitives, and leading to portfolio optimization in a Bayesian context with parameter uncertainty. Bob Litterman, Head of Quantitative Resources, Goldman Sachs Asset Management This book takes the reader on a journey through portfolio management starting with the basics and reaching some fascinating terrain. Attilio Meucci shows a real talent for explaining the most difficult of subjects in a very clear manner. Paul Wilmott, wilmott.com "This book presents a detailed and well-explained introduction to one-period asset allocation techniques … . the book gives an impressive and comprehensive introduction to static one-period asset allocation. It explains most of the concepts intuitively and with a minimal mathematical machinery. … For practitioners, the book serves as a theoretical basis of their actual work. For students of finance and economics it gives a self-contained overview of the main quantitative concepts in the subject." (Ludger Overbeck, SIAM Review, Vol. 48 (3), 2006) "This book delves into the classical mathematics of portfolio optimization with a few nods to more recent developments in risk measurement such as value-at-risk and copulas. … For anyone with an interest in the mathematics of portfolio optimization, the book is certainly worth a look. … The author covers a wealth of statistical and optimization techniques that are worth reading about." (www.riskbook.com, May, 2006) "The book offers a wide exposition of the main approaches to asset allocation, starting from the classical models up to the recent developments in portfolio management. … By virtue of the sequential structure of the subjects and the simple but efficacious mathematical treatment, the monograph is useful for graduate students and quantitatively-oriented practitioners too. … The book is complemented by online resources, consisting of software applications performed by MATLAB … ." (Emilia Di Lorenzo, Zentralblatt MATH, Vol. 1102 (4), 2007)
Product Description
Discusses in the practical and theoretical aspects of one-period asset allocation, i.e. market Modeling, invariants estimation, portfolia evaluation, and portfolio optimization in the prexence of estimation risk The book is software based, many of the exercises simulate in Matlab the solution to practical problems and can be downloaded from the book's web-site
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Customer Reviews
Most Helpful Customer Reviews
3 of 3 people found the following review helpful
Format:Hardcover
This is a handbook for quants or aspiring ones, who are working in the industry and dealing with the technocratic mathematical properties needed for Matlab programming or creating applications. One of the best books I have seen in that vein. Then, if you are
Good at Math:
This is amazing book if you really know your math, e.g. truly understand Fourier transformations to get chracteristic functions from the pdfs and are interested in thinking on that level. The author always gives analytical solutions and shows carefully the mathematical reasoning. There is more, lots of really good Matlab material, which show how to write the code in question, and awesome powerpoint slides available for teaching. As it covers all the material, but not "strong views" about the topic, it is a good book for courses in advanced mathematical finance, on condition that Matlab is available for exercises. Works great as a reference book in the shelves of hardcore quants too, as it is well-written and he always refers to the other chapters in the book when needed. Absolutely 5 stars.
Know some or no math:
It may get frustrating, as you might not get anything concrete out of it. The book explains everything highly logically, but you are supposed to nail your math elsewhere, as the author does not really translate anything to practical "low level" details. Also, the book does not spell out any heuristic or practical approach, "DO/LEARN IT LIKE THIS" the ordinary applied finance guy would like. The applied guy would be happy with 90% less mathematical reasoning, and 20% more rules of thumb applications. You are supposed to be interested in the MATH part of the topic! This is why, it might not be the best book for people studying on their own, unless you are strong in Math and Matlab. 3 points.
I personally liked the best the Matlab material, downloadable from Meucci's homepage, which helped me getting my Matlab skills to a new level. I am doing my M. Sc. in Finance, and I definitely needed the lectures of my professor to get started and to understand how everything in the book relates to the stuff I already know.
Good at Math:
This is amazing book if you really know your math, e.g. truly understand Fourier transformations to get chracteristic functions from the pdfs and are interested in thinking on that level. The author always gives analytical solutions and shows carefully the mathematical reasoning. There is more, lots of really good Matlab material, which show how to write the code in question, and awesome powerpoint slides available for teaching. As it covers all the material, but not "strong views" about the topic, it is a good book for courses in advanced mathematical finance, on condition that Matlab is available for exercises. Works great as a reference book in the shelves of hardcore quants too, as it is well-written and he always refers to the other chapters in the book when needed. Absolutely 5 stars.
Know some or no math:
It may get frustrating, as you might not get anything concrete out of it. The book explains everything highly logically, but you are supposed to nail your math elsewhere, as the author does not really translate anything to practical "low level" details. Also, the book does not spell out any heuristic or practical approach, "DO/LEARN IT LIKE THIS" the ordinary applied finance guy would like. The applied guy would be happy with 90% less mathematical reasoning, and 20% more rules of thumb applications. You are supposed to be interested in the MATH part of the topic! This is why, it might not be the best book for people studying on their own, unless you are strong in Math and Matlab. 3 points.
I personally liked the best the Matlab material, downloadable from Meucci's homepage, which helped me getting my Matlab skills to a new level. I am doing my M. Sc. in Finance, and I definitely needed the lectures of my professor to get started and to understand how everything in the book relates to the stuff I already know.
0 of 3 people found the following review helpful
Format:Hardcover
This is a really great book for anybody how enjoys finance and asset allocation. Rich in content and depth.
Most Helpful Customer Reviews on Amazon.com (beta)
Amazon.com:
3 reviews
14 of 16 people found the following review helpful
outstanding professional resource
24 Aug 2010
Format:Paperback
This outstanding book on portfolio theory is a must-have for the professional risk-manager and trader. Note that this bound book is really one of three that Dr. Meucci has written; there is a full-length technical appendix and a full-length problems book that are on-line and free of charge. Also, all of his code is available from the Matlab Central site.
I acknowledge another reviewer's pov that the notation is non-standard, however I have a different reaction. Meucci has designed a notation that uniformly covers what are otherwise highly diverse fields. With this unified notation connections and comparisons are made quickly and effectively across areas that have to date been hard to reconcile. For instance, Chapter 5 on indices of satisfaction: I defy anyone to have a clearer comparison on the certainty equivalent, variance at risk, and coherence measures -- three areas that to my readings of the literature are otherwise unavailable all in one place. As another example: portfolio theory *is* all about multidimensional distributions, and Meucci covers uni- and multi-variate statistics in his first three chapters with deep additions in his technical appendices. Using this as a base it is clear how to construct and forecast the returns on a portfolio.
This book additionally brings robust statistical analysis to the fore. Rather than leaving the reader with a multivariate gaussian models and Markowitz mean-variance optimization Meucci starts in his later chapters a full repeal of these simple approaches and looks both at robust distribution analysis along with robust, or constrained, such as second-order cone programming, analysis of returns and optimization. This is the forefront of risk theory.
Given that Dr. Meucci lectures around the world on these materials and has made so much of his work available and largely free, I find it the height of laziness of the other reviewer to given 1 star and complain about notation. Rather, Meucci's book and material are the starting point for a well-conceived approach to the field and literature.
I acknowledge another reviewer's pov that the notation is non-standard, however I have a different reaction. Meucci has designed a notation that uniformly covers what are otherwise highly diverse fields. With this unified notation connections and comparisons are made quickly and effectively across areas that have to date been hard to reconcile. For instance, Chapter 5 on indices of satisfaction: I defy anyone to have a clearer comparison on the certainty equivalent, variance at risk, and coherence measures -- three areas that to my readings of the literature are otherwise unavailable all in one place. As another example: portfolio theory *is* all about multidimensional distributions, and Meucci covers uni- and multi-variate statistics in his first three chapters with deep additions in his technical appendices. Using this as a base it is clear how to construct and forecast the returns on a portfolio.
This book additionally brings robust statistical analysis to the fore. Rather than leaving the reader with a multivariate gaussian models and Markowitz mean-variance optimization Meucci starts in his later chapters a full repeal of these simple approaches and looks both at robust distribution analysis along with robust, or constrained, such as second-order cone programming, analysis of returns and optimization. This is the forefront of risk theory.
Given that Dr. Meucci lectures around the world on these materials and has made so much of his work available and largely free, I find it the height of laziness of the other reviewer to given 1 star and complain about notation. Rather, Meucci's book and material are the starting point for a well-conceived approach to the field and literature.
19 of 28 people found the following review helpful
Not for the faint-hearted
31 Jan 2007
Format:Hardcover
A great book if you have a strong mathematical background. But the question of asset allocation is bedevilled by mathematics which is too strong to support the weak data supplied by the markets in which we invest.
Unless this weak data is properly integrated into the asset allocation process, an area which Meucci spends too little time on, then the users of quantitative procedures will continue to be disappointed.
Unless this weak data is properly integrated into the asset allocation process, an area which Meucci spends too little time on, then the users of quantitative procedures will continue to be disappointed.
15 of 26 people found the following review helpful
a terriblly written and typeset text
25 Jun 2010
Format:Paperback
Writing a book about a well developed technical subject does not require publishing one's own new ideas, but collecting the relevant and useful works and presenting them in a well-organized, easy to read, standard and accessible form. This is a point that Meucci fails to follow.
The whole book is written in a weird non-standard typesetting of formulas and mathematical equations. Clearly the author does not have any idea on where one should use parentheses, square brackets or curly brackets, and he has a strong desire to use curly brackets as much as he can. This causes one to spend more time to understand the formulas when it really becomes difficult to say it right away that for example E{...} is expected value, E times some equation or function E evaluated at some point. And yes, there are equations that the same letter E is used to mean different things.
There is also an unprofessional disregard of common/standard notations in the whole book. A good example is the Black-Scholes call option pricing formula. This is such a well-known formula that it takes no time to recognize it when you see it in a finance book. But in this book, look up the formula and see how long it takes for you to comfortably feel that this is the same BS formula that you already knew. What do you expect U, Z and E stand for in this formula? And to let you know, this is not the only place that, ironically, error function is used instead of normal cumulative.
In the book, you will find yourself reading same sentences and even paragraphs again and again, and not only this does not help to have any subtle or sophisticated point stick in mind but also makes reading of the book an annoying tedious experience. This is a clear indication that the writer has failed to well organize the book in order to avoid repeating himself. An example of this is multiple re-defining of PCA decomposition of a matrix.
Another very standard norm which is annoyingly ignored in the book, is that only the equations which are referred in the text should be numbered, so that you will not end a chapter while numbering an equation (3.262), and referring to equation numbers of such long in the text, and making a page with multiple formulas full of equation numbers.
I do not know that Meucci has ignored standard conventions in technical finance literature in order to introduce a "fresh look" to the subject or had aimed to establish a sense of individualism by not following the norm. Whatever the reason, the text has become annoyingly unreadable and hard to access.
The whole book is written in a weird non-standard typesetting of formulas and mathematical equations. Clearly the author does not have any idea on where one should use parentheses, square brackets or curly brackets, and he has a strong desire to use curly brackets as much as he can. This causes one to spend more time to understand the formulas when it really becomes difficult to say it right away that for example E{...} is expected value, E times some equation or function E evaluated at some point. And yes, there are equations that the same letter E is used to mean different things.
There is also an unprofessional disregard of common/standard notations in the whole book. A good example is the Black-Scholes call option pricing formula. This is such a well-known formula that it takes no time to recognize it when you see it in a finance book. But in this book, look up the formula and see how long it takes for you to comfortably feel that this is the same BS formula that you already knew. What do you expect U, Z and E stand for in this formula? And to let you know, this is not the only place that, ironically, error function is used instead of normal cumulative.
In the book, you will find yourself reading same sentences and even paragraphs again and again, and not only this does not help to have any subtle or sophisticated point stick in mind but also makes reading of the book an annoying tedious experience. This is a clear indication that the writer has failed to well organize the book in order to avoid repeating himself. An example of this is multiple re-defining of PCA decomposition of a matrix.
Another very standard norm which is annoyingly ignored in the book, is that only the equations which are referred in the text should be numbered, so that you will not end a chapter while numbering an equation (3.262), and referring to equation numbers of such long in the text, and making a page with multiple formulas full of equation numbers.
I do not know that Meucci has ignored standard conventions in technical finance literature in order to introduce a "fresh look" to the subject or had aimed to establish a sense of individualism by not following the norm. Whatever the reason, the text has become annoyingly unreadable and hard to access.
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