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  • January 12, 2015: IAQF & Thalesians Seminar Series

January 12, 2015: IAQF & Thalesians Seminar Series

  • 12 Jan 2015
  • 5:45 PM (EST)
  • NYU Kimmel Center, Room 914, 60 Washington Square South, New York, NY

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Forced Liquidations, Fire Sales, and The Cost of Illiquidity
A Talk by
 Andrew Weisman





 
Abstract

Institutional investors seeking diversification often build portfolios using collections of securities with widely varying characteristics. To facilitate diversification, investors rely on the “common currencies” of reported return, volatility, and correlation, and employ them as inputs to portfolio construction/ optimization models or processes. Investors using this approach are often drawn to investment opportunities that appear to exhibit diversifying properties because of their limited price discovery. Such opportunities tend to be relatively illiquid when compared to traditional investmentsundefinedinvestors simply take for granted that they receive a “liquidity premium” that compensates them for the lack of liquidity. Illiquidity in such investments (like hedge funds, private equity or structured credit) is most often measured by serial correlation  in the reported return series of the investment, because such autocorrelation is viewed as a sign of price smoothing caused by an inability to accurately price less liquid securities or investments. More sophisticated investors may adjust the return data by taking into consideration observed serial correlation in order to decode the true volatility of the portfolio; thereby correcting both the volatility and the risk adjusted performance of the investment. Such simple adjustments for serial correlation, however, fail to capture a major cost associated with illiquidityundefinedthat of forced liquidations and “fire sales”.  This presentation examines an intuitive, rigorous method for pricing this cost. 

 


Biography

Andrew Weisman is Chief Investment Officer, Liquid Alternatives. In this role, Mr. Weisman serves as the firm’s subject-matter expert and thought leader on multi-asset strategies. Mr. Weisman also co-manages Janus’ liquid alternative strategies and is a member of the Janus Capital Group Global Allocation Committee. Mr. Weisman uses proprietary, allocation methodologies to assist clients in combining traditional and non-traditional asset risk premia.Prior to joining the firm in 2012, Mr. Weisman was CEO of WR Platform Advisors, Inc., a technology platform and service provider of managed accounts, risk analytics, and investor reporting for hedge funds. Before that, he was Managing Director and Chief Portfolio Manager for Merrill Lynch's Hedge Fund Development and Management Group. Prior to that he was Chief Investment Officer and Member of the Board of Directors for Nikko International.


Mr. Weisman has published an extensive collection of articles on asset allocation and risk issues related to hedged portfolios. His research awards include the Bernstein Fabozzi/Jacobs Levy Award for Outstanding Article published in The Journal of Portfolio Management in 2002 and the 2003 GAIM Research Paper of the Year. He has a bachelor's degree from Columbia College, a master's in international affairs from Columbia and was awarded a doctoral fellowship to Columbia University's Graduate School of Business, where he completed all coursework and comprehensive exams toward a PhD. He has over 26 years of experience in portfolio construction and risk management, particularly in alternative asset strategies. He serves on the board of the International Association for Quantitative Finance, the Editorial Advisory Board of the Journal of Portfolio Management, and as Treasurer of the Society of Columbia Graduates.

 


About the Series

The IAQF's Thalesians Seminar Series is a joint effort on the part of the IAQF (www.iaqf.org) and the Thalesians (www.thalesians.com). The goal of the series is to provide a forum for the exchange of new ideas and results related to the field of quantitative finance. This goal is accomplished by hosting seminars where leading practitioners and academics present new work, and following the seminars with a reception to facilitate further interaction and discussion. 


Registration Fees:
Complimentary for IAQF members through this site
Thalesians Members can register here for $25
Non-Members: $25.00 by registering through this site
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