Make Glidepaths Great Again: Conventional glide paths with a Markowitz risk buget approach.

Specialeforsvar. Mikkel Bech Mogensen

Titel: Make Glidepaths Great Again: Conventional glide paths with a Markowitz risk buget approach

Abstract: Conventional glide paths of target date funds, while straightforward, may oversimplify the assumption of risk, potentially leading to suboptimal asset allocation for these funds. This master thesis challenges the conventional design of glide paths, and breaks down its application and potential limitations in practice. We introduce a new approach to design glide paths of target date funds, where a certain level of risk is budgeted for each target date. Based on the risk budget curves, the model derives the optimal asset allocation of target date funds corresponding to the risk budget at that time. These refined investment strategies are referred to as risk budget glide paths.

Vejledere: Rolf Poulsen og Kourosh M Rasmussen

Censor: Kim Christensen