Knowledge Base Articles
Beyond Modern Portfolio Theory: Expected Utility Optimisation
The modern wealth management industry still relies on the 50-year-old approaches to portfolio management, widely popularized by Markowitz's Modern Portfolio Theory (1952). Despite heavy criticism within the academic circles, the alternative methods remain undeservingly overlooked in practice. In the context of the modern leap for hyper-customization, we look into one of the alternatives to Modern Portfolio Theory in greater detail - the Utility-based approach.
Part I: Asset and Liability Management Using LSMC - Introduction to the Framework
In the first part of the ”Asset and Liability Management using LSMC” article series, we outline an ALM framework based on a replicating portfolio approach along with a suitable financial objective. This ALM framework, albeit simplified, is constructed to provide a straightforward replication of the complex interactions between assets and liabilities. Moreover, a brief introduction to the LSMC method used to generate all underlying risk factors is presented.
May 2019 News Update
The introduction of automated financial advice services did not go successfully for some of the large and reputable wealth managers. As some of the industry players cease their robo advice offerings, we explore the reasons why big banks struggled to tap into the customers' demands. Meanwhile, machine learning solutions continue to expand to various business functions throughout the increasingly digitalising economies. However, little attention is paid towards the quality and the transparency of the decision-making powered by these "black boxes". Finally, in the world of accelerating personalisation standards, it is crucial to expand the innovation efforts beyond the interfaces and use the technological capabilities to improve the actual offerings.
April 2019 News Update
We are delighted to present our analysis of the top April trends within the financial industry! This month we identified the growing need for risk expertise among the asset managers striving to provide truly sustainable financial advice. Moreover, we see that a different set of factors determines the competition among the digital offerings in asset management compared to the traditional financial advisory services. Additionally, we firmly believe that it is crucial for the financial institutions to measure and prepare for the impact of the looming -IBOR transition early on, and come up with an appropriate action plan to minimise the adverse PnL effects.
March 2019 News Update
We've selected the most relevant global news within the fields of automated financial advice, data intelligence and balance sheet risk this March. The rise of the robo-advisors concern the brokers, although many see this development as a helpful complement to the traditional wealth management business, stressing the regulatory burden as well as IT legacy systems' challenges. Meanwhile, Brexit leads to a spike in risk-aversion among the customers of Do-It-Yourself investment platforms. On the balance sheet risk side, the experts stress the importance of timely preparations to IFRS 17, FRTB and the transition from LIBOR. The machine learning tools are put to use in fraud detection in the banking industry context, and the Positive-Incentive ESG-based Loans gain prominence among the banks and corporations.
Women in Quantitative Finance: Interview with Mika Lindahl
We are excited to share the story of Mika Lindahl, an associate consultant and a team manager at Kidbrooke Advisory. She has been working at the company for more than 1.5 years now, successfully balancing deep technical expertise with excellent leadership skills. In this short interview piece, Mika tells us about her career choice, her role in quantitative finance and her message to women considering a similar path.