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Old 09-14-2018, 11:35 AM
timmbo1987 timmbo1987 is offline
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DNMMR - Tasks 2 & 4. I guess I am at a loss at how to re-tackle Task 2. Task 4 will follow the risk/return requirements and metrics that I use in Task 2, so I am not really worried about that question. But, I am starting to get a little flustered. This is my second DNMMR for the Final Assessment.

So, my approach to Task 2 was to initially set a maximum level for volatility (which essentially limits the amount invested in risky assets, or equities), then my goal was to find the lowest possible CTE at the 95% confidence level. I ran something like 20 scenario, found the scenario that matched my risk/return requirements, and then I used that asset mix percentage (which was 25% Treasuries, 65% Bonds, and 10% Equities). Then, I used the mean for that given scenario to be the annual contribution amount.

I thought that was a good approach to the question, but for some reason, and for the second time, the graders did not agree.

Any thoughts as to how one may improve this approach or how you may approach this problem?

Should I set the Equity Percentage first (say 10%), run dozens of scenarios, and then find the one that has the lowest coefficient of variation? I am thinking of maybe using a ratio for this attempt? Ultimately we want the volatility for the asset mix to be low as we want the fund to remain solvent. That is the primary, fundamental purpose of this fund.
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