CASE STUDY

Case Study



Case Study

(A)

Both investors can mitigate both longevity and investment-performance risks with a carefully constructed combination of longevity-insurance products, which offer investors a guaranteed income stream, and traditional assets, such as exchange-traded funds and mutual funds. What is the best combination? That depends. After running hundreds of simulations, Ibbotson created guidelines to help advisors and their clients set the optimal allocations in their retirement portfolios to insure an income for life. Ibbotson's research shows that advisors and clients must weigh a number of variables that depend on each client's situation and goals (Borodin, 2004, 61).

However, the portfolio has some weak characteristics. Basically, it starts by an assumption that the vector of expected returns of assets is known and the covariance matrix is known and stable over the time of investment. However, it is not so easy to estimate expected returns, because future is not known and there are many factors which one must take into consideration. Apart from that, much stronger assumption is the one about the correlation matrix. It is not so clear that the correlation between to assets is stable over time. Moreover, it is often difficult to estimate what the correlation coefficient is.

The methods used are a combination of statistical techniques that work only with large numbers, which is often not obtainable, and the judgment of practical men. Hence, it is in fact impossible to state the model with real parameters and so, the solution that we get is always only an approximation of the legitimate optimal portfolio. When investors are accumulating assets in the years before retirement, the sequence of the portfolio's returns is not important. During retirement, the sequence of returns becomes crucial (Hirschberger, 2004, 36). Fortunately, investors and advisors have access to effective tools to combat these risks.

(B)

Tony proposed a portfolio assessment model as a guide for portfolio assessments. Although the model was designed for a language course, it covered some strategies that could be readily adapted for use in other subjects and at different levels of study. There are few strengths and weaknesses in proposed portfolio are outlined as follows:

Select portfolio contents appropriately. Ensure the contents of the portfolio achieve their purpose and educational goals. Identify students' strengths and weaknesses using both formal and informal techniques, such as formal testing and students' self-ratings. Use this information as a reference for designing the portfolio contents.

Design the assessment criteria. Set clear standards and criteria for assessing the portfolio contents. The improvement between students' present and previous performance and the mastery of acquired skills are the examples of assessment criteria. Integrate all information collected from the portfolio. Develop a coherent approach for analysis because the portfolio may contain diverse types of information, such as observations, teacher checklists.

Plan carefully for the instructional use of portfolio information. Information about students performance that is collected from the portfolio can be used in different ways, such as monitoring student progress, assigning grades and providing feedback to students about their personal ...