The Effects of Credit Risk on Dynamic Portfolio Management: A New Computational Approach

The study investigates the role of credit risk in a continuous time stochastic asset allocation model, since the traditional dynamic framework does not provide credit risk flexibility. The general model of the study extends the traditional dynamic efficiency framework by explicitly deriving the optimal value function for the infinite horizon stochastic control problem via a weighted volatility measure of market and credit risk. The model's optimal strategy was then compared to that obtained from a benchmark Markowitz-type dynamic optimization framework to determine which specification adequately reflects the optimal terminal investment returns and strategy under credit and market risks. The paper shows that an investor's optimal terminal return is lower than typically indicated under the traditional mean-variance framework during periods of elevated credit risk. Hence I conclude that, while the traditional dynamic mean-variance approach may indicate the ideal, in the presence of credit-risk it does not accurately reflect the observed optimal returns, terminal wealth and portfolio selection strategies.

Digital repository implementation: a toolbox for streamlined success

Purpose – The purpose of this paper is to describe the tools and strategies that were employed by C/W MARS to successfully develop and implement the Digital Treasures digital repository. Design/methodology/approach – This paper outlines the planning and subsequent technical issues that arise when implementing a digitization project on the scale of the large, multi-type, automated library network. Workflow solutions addressed include synchronous online metadata record submissions from multiple library sources and the delivery of collection-level use statistics to participating library administrators. The importance of standards-based descriptive metadata and the role of project collaboration are also discussed. Findings – From the time of its initial planning, the Digital Treasures repository was fully implemented in six months. The discernable and statistically quantified online discovery and access of actual digital objects greatly assisted libraries unsure of their own staffing costs/benefits to join the repository. Originality/value – This case study may serve as a possible example of initial planning, workflow and final implementation strategies for new repositories in both the general and library consortium environment. Keywords – Digital repositories, Library networks, Data management. Paper type – Case study