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Methods

There are a number of approaches that can be used to address the issue of risk management in the context of strategic asset allocation. Each provides different advantages and disadvantages when applied to different real-world problems. They are all similar in terms of their basic structure. They have to be integrated into a process that first captures the decision-making environment as comprehensively as possible and that also includes ongoing monitoring and implementation.

All methods then map the exogenous risks as part of this process. PROTINUS does this through a sophisticated scenario generation process, which has proven to be the best approach. Holistically in one step the effects of the exogenous risks on the individual structure have to be assessed, which is ideally done through simulations. The individual risks are thus captured with a high degree of realism, forming the basis on which the strategy can be optimised using a flexible procedure, while sticking as closely as possible to the investor's order of preferences.