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- Title
Strategic Asset Allocation and Inflation Resilience.
- Authors
Phoa, Wesley K.
- Abstract
Inflation risk poses a significant challenge to strategic asset allocators and is forcing many to reevaluate the suite of quantitative tools they use. In particular, standard simulation methods are inadequate for modeling inflation dynamics and do not generate uncertainty in long-term average inflation. Furthermore, despite low-frequency regime switching between negative and positive stock-bond correlation regimes, linked to inflation dynamics, standard methods do not incorporate this either. Finally, when markets are undergoing long-term structural changes, modeling choices should be able to integrate the forward-looking expectations of subject matter experts on joint economic and market dynamics. This article describes a simple way of retrofitting these features to an existing simulation engine.
- Subjects
ASSET allocation; PRICE inflation; MONTE Carlo method; INFLATION risk; BONDS (Finance)
- Publication
Journal of Portfolio Management, 2023, Vol 49, Issue 4, p45
- ISSN
0095-4918
- Publication type
Article
- DOI
10.3905/jpm.2023.1.465