Services Offered by Algofin AG

 


 

Implementation of a Structured Investment Process / Asset Liability Management (ALM)

Pension Funds and other Institutional Investors seek to achieve a target return while maintaining a specified risk budget constraint. Algofin AG supports its clients in the whole process of Asset Liability Management (ALM) - starting with a thorough analysis of the client's investment objectives, the definition of the strategic asset allocation, up to the cost-efficient implementation and controlling of a structured investment process. Further, Algofin AG supports its clients as a proficient partner in Manager Search and Selection projects.

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Valuation of Employee Stock Options with the Enhanced American Model

Common option pricing models are not flexible enough to incorporate typical characteristics of employee stock options. Algofin AG developed a flexible model to determine fair values: the Enhanced American Model (EA Model). The model accounts for the specific features of employee stock options and is fully compatible with IFRS 2 and FASB 123 standards. As characteristics of employee stock options are incorporated, the model produces fair values that are well below option prices obtained by common methods.

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Modeling Electricity Prices

The accurate modeling of electricity prices forms an important basis for various valuation and risk management tasks. Due to the very limited storability of electricity, power prices feature a number of characteristics that are unparalleled in financial or more traditional commodity markets. Therefore, when modeling electricity prices, a careful selection of the main influencing factors of power markets is key.

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Optimal Currency Hedging

Modern portfolio theory suggests that optimal foreign currency hedge ratios should be jointly determined with the portfolio’s strategic asset allocation. However, such ex ante optimal hedge ratios need not be optimal in hindsight. For a hypothetic CHF-based global investor, Algofin has examined optimal currency hedging and found some interesting results.

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Equal Risk Contribution Indexation (ERC)

Despite the theoretically convincing arguments in favor of value-weighted investing, alternative allocation schemes have been much en vogue recently. Two popular strategies include fundamental indexation and naïve diversification. Another fairly new approach is so-called equal risk contribution indexation (ERC). In a recent study, Alogfin has examined this approach on the Swiss stock market.

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