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Constant Volatility Research wins National Alternatives Award
Montreal, April 19, 2011 – Brockhouse Cooper Asset Management’s White Paper: A Constant Volatility Framework for Managing Tail Risk has been awarded the 2010 AIMA Canada- Hillsdale Research Award (ACHRA).
Authored by Dr. Alexandre Hocquard, Portfolio Manager; Sunny Ng, Director Alternative Strategies and Dr. Nicolas Papageorgiou, Director Quantitative Research and Associate Professor at HEC Montreal, the paper presents a novel approach to managing tail risk.
“We are honored to have our research chosen for this prestigious award,” said Mr. Ng. “We believe our innovative risk management strategy, which is rooted in academia, presents our clients with a practical and cost effective approach to managing tail risk.”
The authors’ research shows that the failure of strategic asset allocation as the sole risk management tool can largely be attributed to the fact that volatility is not stable over time, and historical correlations between asset classes tend to break down during periods of market stress. Conventional tail-risk hedging techniques such as the use of options, swaps, and other insurance instruments can be costly and implicitly create a drag on portfolio performance. In response, the authors demonstrate that investors can better manage tail risk and improve risk-adjusted returns by seeking to maintain a constant level of volatility. Their approach uses futures contracts to dynamically adjust the portfolio's exposure in response to changes in the prevailing level of market volatility.
A summary of the paper will be published in the Canadian Investment Review. Read the full text here.
The ACHRA prize, now in its sixth year, is given annually to academics, students or practitioners in Canada who conduct proprietary research pertaining to any aspect of alternative investments. The winning submission is determined by an independent adjudication panel chaired by Paul Bates, Dean of the DeGroote School of Business at McMaster University. The panel consists of leading academic faculty from business schools across Canada.
Brockhouse Cooper Asset Management (BCAM) provides an open-architecture, fully customizable asset management service for institutional and private investors. In addition to select traditional investment strategies, BCAM creates tailored investment solutions and products designed to meet the specific requirements of clients. BCAM is a division of Pavilion Asset Management Ltd, a wholly-owned subsidiary of Pavilion Financial Corporation, a global financial services firm with offices in Canada, the UK and Israel.
