文章基本信息

标题：Forward-Looking Volatility Estimation for Risk-Managed Investment Strategies during the COVID-19 Crisis
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作者：Luca Di Persio ; Luca Di Persio ; Luca Di Persio 等
期刊名称：Risks
印刷版ISSN：2227-9091
出版年度：2021
卷号：9
期号：1
页码：33
DOI：10.3390/risks9020033
语种：English
出版社：MDPI, Open Access Journal
摘要：Under the impact of both increasing credit pressure and low economic returns characterizing developed countries, investment levels have decreased over recent years. Moreover, the recent turbulence caused by the COVID-19 crisis has accelerated the latter process. Within this scenario, we consider the so-called Volatility Target (VolTarget) strategy. In particular, we focus our attention on estimating volatility levels of a risky asset to perform a VolTarget simulation over two different time horizons. We first consider a 20 year period, from January 2000 to January 2020, then we analyse the last 12 months to emphasize the effects related to the COVID-19 virus’s diffusion. We propose a hybrid algorithm based on the composition of a GARCH model with a Neural Network (NN) approach. Let us underline that, as an alternative to standard allocation methods based on realized and backward oriented volatilities, we exploited an innovative forward-looking estimation process exploiting a Machine Learning (ML) solution. Our solution provides a more accurate volatility estimation, allowing us to derive an effective investor risk-return profile during market crisis periods. Moreover, we show that, via a forward-looking VolTarget strategy while using an ML-based prediction as the input, the average outcome for an investment in a drawdown plan is more sustainable while representing an efficient risk-control solution for long time period investments.