Nobel uses Matlab for its risk management strategy
14 January 2014Tweet
MathWorks has announced that The Nobel Foundation has adopted Matlab to support the asset-liability management strategies of its $500 million portfolio.
The Nobel Foundation will build and implement a risk scenario and asset return simulation engine for its fund. This will initially be used to target a 30-year outlook with the potential to increase the timeframe to 100 years as the model architecture develops.
The Nobel Foundation is employing Matlab to produce a clear perspective of its long-term cash flows and risk sensitivities. ‘Our costs are relatively fixed, but we were unsure how our asset portfolio – equities, property, hedge fund investments, and fixed income, will evolve over time.’ said Gustav Karner, chief investment officer at The Nobel Foundation. ‘We will use Matlab to help us understand the risks our portfolio faces and build a flexible simulation engine for medium and long-term asset performance projections.’
The Nobel Foundation’s models built using Matlab will use Monte Carlo simulation methods to analyse, model and project estimated asset returns, key correlations, and standard deviations, with particular focus on the 2.5 per cent worst- and best-case performance scenarios.
The foundation’s fund targets a 3.5 per cent returns plus inflation for the aggregated portfolio in the medium term, but benchmarking and assessing returns performance vary by asset class and time horizon.