Bertrand

Publications

Portfolio Insurance: The Extreme Value Approach Applied to the CPPI MethodBook chapterPhilippe Bertrand and Jean-Luc Prigent, In: Extreme Events in Finance: A Handbook of Extreme Value Theory and its Applications, Francois Longin (Eds.), 2016-10, pp. 465-482, Wiley, 2016

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Equilibrium of financial derivative markets under portfolio insurance constraintsJournal articlePhilippe Bertrand and Jean-Luc Prigent, Economic Modelling, Volume 52, Issue Part A, pp. 278-291, 2016

This paper examines the equilibrium of financial portfolios under insurance constraints on terminal wealth. We consider a single period economy in which agents search to maximize the expected utilities of their wealth at maturity. Three main classes of financial assets are considered: a riskless asset (usually the bond), a risky asset (the stock) and European options of all strikes (corresponding to financial derivatives). Both partial and general optimal financial equilibria are determined and analyzed for quite general utility functions and insurance constraints.

How performance of risk-based strategies is modified by socially responsible investment universe?Journal articlePhilippe Bertrand and Vincent Lapointe, International Review of Financial Analysis, Volume 38, Issue C, pp. 175-190, 2015

Risk-based allocation strategies, also known as Smart Beta allocations, define the weights of assets in portfolios as functions of the individual and common asset risk. In this paper we focus on the Minimum Variance (MV), Maximum Diversification (MD), Equal Risk Contribution (ERC) and Equal-Weight (EW) risk-based allocation strategies. The popularity of risk-based strategy is commonly justified by their good record of out-performing the cap-weighted (CW) allocation strategy. Because of the low-volatility profile of risk-based allocations this is especially true when crises occur. From March 15, 2002 to May 1, 2012 we investigate how using a socially responsible investment universe impacts performance of risk-based allocation strategies. We use different measures of performance, included risk-adjusted one (multi-factor models), and we propose to disentangle the effect of using a SRI universe from the effect of using risk-based allocations. SRI universe only contains firms that have good environmental, social and governance performance. This kind of filtering is increasingly popular among institutional investors. On the estimation period, using European stocks, we find that the use of the SRI universe has a positive contribution to risk-adjusted performance of risk-based allocations. However this contribution is not uniform among all the risk-based allocation strategies and, can represent only a small part of the total alpha that is observed.

French Retail Financial Structured Products: A Typology and Assessment of Their Fair PricingJournal articlePhilippe Bertrand and Jean-Luc Prigent, Bankers, Markets & Investors, Issue 135, pp. 4-18, 2015

This paper deals with the pricing of financial structured products. We examine French retail structured products, “OPCVM. Formule”, from a sample including about 650 funds. First, we detail the main characteristics of this market and propose a simplified typology of all these products. Second, we analyze some of the most common contracts with portfolio insurance, which correspond to specific portfolio profiles based on performances of given underlying assets, usually the major French or European stock indices. Using the standard Black and Scholes pricing with appropriate financial parameters, we compute the initial values of such products. Our numerical results on the fair pricing of French financial structured products agree with previous studies in other countries, for example those for the German and Swiss markets. The magnitude of mispricing lies between 2 % and 7 %.

Risk Attribution AnalysisBook chapterPhilippe Bertrand, In: Investment Risk Management, H. K. Baker and G. Filbeck (Eds.), 2015, pp. 387-407, Oxford University Press, 2015

A common practice in the financial management industry is to combine portfolio risk attribution with performance attribution. Performance attribution considered alone is insufficient and can be misleading. Tracking-error attribution is only consistent with some types of efficient portfolios. The next step in the portfolio evaluation process combines performance attribution and risk attribution in a single measure of risk-adjusted performance attribution. Given three levels in the analysis of information ratio attribution that can possibly lead to conflicting results, analysts must exercise care in interpretation. Component information ratios are particularly useful in assessing whether equilibrium between expected returns and relative risk has been reached.

On Path-Dependent Structured Funds: Complexity Does Not Always Pay (Asian versus Average Performance Funds)Journal articlePhilippe Bertrand and Jean-Luc Prigent, Finance, Volume 36, Issue 2, pp. 67-105, 2015

As emphasized by the U.S. Dodd-Frank Act and the European MiFID directive, financial institutions are required to ?categorise their clients and assess their suitability for each type of investment product.? In this framework, this paper examines several standard financial structured products whose performances are based on smoothing the return of an underlying risky asset and providing a guarantee at maturity. We use various criteria such as probabilities of providing merely the guarantee at maturity and Kappa measures. Surprisingly, our study reveals that funds based on averages of calls generally do better than Asian funds.

Raising Companies’ Profile with Corporate Social Performance: Variation in Investor Recognition and Liquidity Linked to Vigeo CSP Rating Disclosure.Journal articlePhilippe Bertrand, Alexis Guyot and Vincent Lapointe, Bankers, Markets & Investors, Issue 130, pp. 41-54, 2014

This paper examines whether the initiation of Vigeo Corporate Social Performance (CSP) rating impacts company profiles. Using a sample of European listed firms, we confirm that there is a positive and significant relationship between CSP rating and a firm’s liquidity and investor base. Consistent with the neglected stock effect, this relationship is sensitive to firm size. Our results have important implications for practitioners. Firstly, investment in Corporate Social Responsibility (CSR) could represent an alternative method of improving a company’s stock market quality alongside liquidity provider contracting or market listing transfer. Secondly, when a firm’s board investigates the opportunity to invest in CSR, it should consider the benefits of lowering the company’s cost of capital through the aforementioned effects. Finally, from an asset manager’s perspective, any change in CSP should be taken into account, as it can affect company valuation and therefore portfolio performance.

Analysis and Comparison of Leveraged ETFs and CPPI-type Leveraged StrategiesJournal articlePhilippe Bertrand and Jean-Luc Prigent, Finance, Volume 34, Issue 1, pp. 73-116, 2013

Among leveraged funds, leveraged ETFs are designed to achieve multiple exposure (e.g., twice) to some financial index returns, on a daily basis. In this paper, we provide and analyze various properties of the value process of a leveraged ETF. We examine its main statistical properties and point out that there is some probability that the stock index price increases while, at the same time, the leveraged fund decreases. This is an event that is difficult to accept for an investor in such a fund. In the continuous-time framework, we prove an equivalence result stating that a leveraged ETF can also be viewed as a CPPI fund with a floor proportional to the portfolio value itself. Next, from a more practical point of view, we compare Leveraged ETFs and Leveraged CPPI having a specific variable leverage. This type of Leveraged CPPI portfolio is not fully equivalent to a Leveraged ETF because the leverage is reduced in falling markets as well as bounded from above. We derive a quasi explicit expression for the value of such Leveraged CPPI. Then, using Monte Carlo simulations, we compare the Leveraged ETFs and Leveraged CPPI return distributions by means of their moments as well as by relying on Omega and Kappa performance measures.

Régime de retraite complémentaire Préfon : les fonctionnaires ont-ils vraiment intérêt à cotiser ?Journal articlePhilippe Bertrand, Économie publique/Public economics, Issue 22-23, pp. 219-242, 2012

Cet article a pour objet d’analyser la rentabilité du régime de retraite complémentaire Préfon à partir des informations publiques dont nous disposons. Nous nous plaçons du point de vue d’un affilié potentiel. Nous conduisons un calcul actuariel classique en ayant recours aux nouvelles tables de mortalité TPGF 05 et TPGH 05. Tout d’abord, nous ne tenons pas compte de l’incidence fiscale puis nous l’analysons. Il ressort de ce travail que la rentabilité réelle obtenue par un affilié dépend de plusieurs facteurs tels que l’âge d’affiliation, l’âge de liquidation et le sexe. L’éventuelle modification de la fiscalité au moment de la retraite joue également un rôle important. Par ailleurs, quelles que soient les valeurs de ces différents facteurs, la rentabilité réelle obtenue semble tout à fait modeste : de 1 % dans les configurations parmi les plus défavorables à 2,6 % dans la configuration la plus favorable.

Gestion de portefeuille : analyse quantitative et gestion structurée, 2e éd.BookPhilippe Bertrand and Jean-Luc Prigent, Finance, 2012-01, 381 pages, Economica, 2012

Depuis les travaux fondateurs de Markowitz (1952), la gestion de portefeuille a connu un développement constant tant dans ses aspects théoriques que du point de vue opérationnel.
En matière de gestion active de portefeuille, le choix des actifs financiers ainsi que celui de leurs pondérations pour composer le portefeuille demeurent les deux questions essentielles. Cependant, l'apparition de nouveaux produits tels les actifs dérivés, l'introduction de profils de gain déterminés ont suscité un développement de la modélisation en matière d'allocation d'actifs, par exemple en assurance de portefeuille ou en gestion alternative.
Face aux problèmes d'incertitude, le développement de la théorie de la décision « rationnelle » s'est appuyé sur des concepts d'aversion au risque et plus récemment sur ceux de mesure de risque. La prise en compte des flux d'information, la flexibilité des stratégies de gestion dynamiques ont été également modélisées.
Face à l'évolution de la recherche théorique et du métier de gérant de portefeuille, cet ouvrage propose un panorama des nouvelles technologies d'ingénierie financière en tentant de synthétiser les principaux résultats établis ces dernières années par le monde professionnel et celui des académiques.
Ce livre s'adresse aux étudiants des masters de finance s'intéressant à la gestion de portefeuille « actions ». Certains chapitres de la deuxième partie sur la gestion structurée peuvent permettre aux professionnels d'approfondir leurs connaissances en matière de modélisation financière.