NDLI: Illiquid Assets in Portfolio Optimization

Content Provider	Springer Nature Link
Author	Diepold, Dennis Dzienziol, Jochen
Copyright Year	2009
Abstract	Eine Liquiditätsanforderung verlangt bei einer Portfoliooptimierung mit illiquiden Assets die Berücksichtigung deren besonderer Eigenschaften. In der vorliegenden Arbeit werden diese Eigenschaften dadurch definiert, dass illiquide Assets nur vollständig verkauft werden können und ein kurzfristiger Verkauf zu Verlusten führt. Anhand eines einfachen Modells werden signifikante Unterschiede zu einer Optimierung mit lediglich liquiden Assets nachgewiesen. So hat beispielsweise die zufällige Liquiditätsanforderung zur Folge, dass der Portfoliowert auch bei sicheren Renditen der Assets bereits unsicher ist, und damit trotz der sicheren Renditen eine Aufteilung sowohl auf liquide als auch illiquide Assets optimal sein kann. Des Weiteren kann der erwartete Portfoliowert abhängig von der Varianz der Assets sein und sich eine negative Korrelation zwischen Assetklassen nachteilig auf diesen auswirken.When optimizing a portfolio, which comprises liquid as well as illiquid assets, under the constraint of a liquidity requirement, one has to take into account the particular characteristics of illiquid assets. Illiquid assets in this context have the constituting property that they can only be sold as a whole and – if sold on a short term basis – selling leads to losses. Performing the analysis of a single period model in a mean downside risk framework with one liquid and one illiquid asset, significant differences are proven in comparison to the results of an optimization concerning solely liquid assets. For example, although the return on assets is safe in the first scenario, the portfolio value is already risky due to the uncertain liquidity requirement and situations arise where the allocation to both the liquid and the illiquid asset is optimal. Furthermore, when asset returns are uncertain, the expected portfolio value depends on the assets’ variances and can even be increased by positive correlations.
Starting Page	1143
Ending Page	1173
Page Count	31
File Format	PDF
ISSN	00442372
Journal	Zeitschrift für Betriebswirtschaft
Volume Number	79
Issue Number	10
e-ISSN	18618928
Language	English
Publisher	SP Gabler Verlag
Publisher Date	2009-10-21
Publisher Place	Wiesbaden
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Portfolio choice Risk Illiquidity Illiquid assets Personal finance Production/Logistics Personnel Management Accounting/Auditing Organization/Planning Management/Business for Professionals Business/Management Science
Content Type	Text
Resource Type	Article
Subject	Business and International Management Economics and Econometrics

Sl.	Authority	Responsibilities	Communication Details
1	Ministry of Education (GoI), Department of Higher Education	Sanctioning Authority	https://www.education.gov.in/ict-initiatives
2	Indian Institute of Technology Kharagpur	Host Institute of the Project: The host institute of the project is responsible for providing infrastructure support and hosting the project	https://www.iitkgp.ac.in
3	National Digital Library of India Office, Indian Institute of Technology Kharagpur	The administrative and infrastructural headquarters of the project	Dr. B. Sutradhar bsutra@ndl.gov.in
4	Project PI / Joint PI	Principal Investigator and Joint Principal Investigators of the project	Dr. B. Sutradhar bsutra@ndl.gov.in Prof. Saswat Chakrabarti will be added soon
5	Website/Portal (Helpdesk)	Queries regarding NDLI and its services	support@ndl.gov.in
6	Contents and Copyright Issues	Queries related to content curation and copyright issues	content@ndl.gov.in
7	National Digital Library of India Club (NDLI Club)	Queries related to NDLI Club formation, support, user awareness program, seminar/symposium, collaboration, social media, promotion, and outreach	clubsupport@ndl.gov.in
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9	IDR Setup or Support	Queries related to establishment and support of Institutional Digital Repository (IDR) and IDR workshops	idr@ndl.gov.in

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