Decision Making in Structured Finance. A Case in Risk-Adjusted Performance Computation

4th Computational Management Science Conference, April 2007

Posted: 7 Jan 2011

See all articles by Rosa Cocozza

Rosa Cocozza

University of Naples Federico II - Faculty of Economics

Albina Orlando

Italian National Research Council (CNR)

Date Written: April 20, 2007

Abstract

The paper investigates the computation of a decision criterion for portfolio choices in the case of structured bonds. The main issue is the computation and the application of risk adjusted indicators as tool to select either the asset portfolio given a structured bond, or the bond structure given an existing coverage asset portfolio. The computation of such indicator is suitable for the appraisal of both portfolio optimization and potential profits of the structured issuance.

The selection tool is put into an asset and liability management decision making context, where the relationship between the expected profit and the capital at risk are compared in order to evaluate the issuance of the bond and the expected rate of return of the whole portfolio.

The case examined is referred to an equity linked bond and is treated by means of Monte Carlo simulations to identify the best portfolio according to the issuer targets and constraints.

Keywords: portfolio optimization, structured bonds

JEL Classification: C68, G11

Suggested Citation

Cocozza, Rosa and Orlando, Albina, Decision Making in Structured Finance. A Case in Risk-Adjusted Performance Computation (April 20, 2007). 4th Computational Management Science Conference, April 2007 , Available at SSRN: https://ssrn.com/abstract=997274

Rosa Cocozza (Contact Author)

University of Naples Federico II - Faculty of Economics ( email )

Via Cintia Monte S. Angelo
Napoli, 80126
Italy
+39/81675083 (Phone)

HOME PAGE: http://www.docenti.unina.it/rosa.cocozza

Albina Orlando

Italian National Research Council (CNR) ( email )

Via San Martino della battaglia, 44
Roma, 00185
Italy

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