The professional management of an investment portfolio of various securities (shares, bonds and other securities) in order to meet specified investment goals. The process includes the specification of investment objectives and constraints, choice of asset mix, formulation of portfolio strategy, ...

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0answers
54 views

Is the Altman Z-Score broken?

When I try to predict future returns with with the Altman Z score, it fails. That would likely not be the case if it predicted bankruptcy well (e.g. the Piotroski F score). It seems to predict ...
3
votes
0answers
50 views

Computing Value at Risk for portfolio in R

I know how to compute VaR with long positions using PerformanceAnalytics. What about a portfolio consisting in two equities A and B, 100 USD long positions in each, and 2 stock options for the same ...
2
votes
1answer
44 views

Systematic Views in Black-Litterman?

Are there any literature on selecting systematic views for Black-Litterman along with methods to specify the uncertainty parameter? For example, rather than specifying a portfolio manager's subective ...
3
votes
0answers
40 views

Clarification of Saturation-Reset Regimes

I have worked my way through this article, waiting to get into school I have been self-learning a bit. I have a good grasp on most of the article, but the component strategy of Saturation and Reset ...
-1
votes
0answers
24 views

building a portfolio without knowing the initial capital

Lets say I have the trades made by trader X on multiple stocks and I want to aggregate them into a portfolio to compute the portfolio return over time. For instance, I know that X bought 10 shares of ...
0
votes
1answer
62 views

What are good online resources for credit portfolio managers?

I am aware that this question is not the typical quant.SE question, BUT I couldn`t find any site/forum/wiki, where credit portfolio managers hang out to share their experience and their methods. ...
0
votes
0answers
42 views

Active or Passive strategy?

From my reading, passive portfoliomanagement means to replicate an index, active portfoliomanagement means to deviate from an index. Does that mean that e.g. rules-based investing is actually an ...
1
vote
0answers
43 views

Investing in all assets with positive expected return and allowing for positive correlation

How does the answer to this question Risk minimization by investing in all assets with positive expected return change if assets can be positively correlated (but not perfectly) and short sales are ...
1
vote
3answers
99 views

What are pros and cons of mean absolute deviation portfolio optimization?

In this question a paper about mean absolute deviation portfolio optimization is mentioned and in the answer a spreadsheet with an implementation is attached. What is the use of this procedure? Does ...
0
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1answer
93 views
3
votes
1answer
95 views

What are recent important papers on credit portfolio risk modeling?

I'm interested in papers which consider mathematical models of risks of different portfolios of retail credit. This is not my area of research, so I may be misusing some terms. The idea is simple: I ...
2
votes
1answer
81 views

The role of Gamma in replicating a put

I am analyzing portfolio protection by replication of a put. Having my portfolio with value $V$ I could buy put giving me the payoff $P$ resulting in a call like pay-off scenario $C=V+P$. Say, I ...
0
votes
1answer
84 views

Risk minimization by investing in all assets with positive expected return

Suppose I have an amount $T$ to invest and $N$ available assets. The stochastic return per invested unit of asset $i$ is $R_i$. The variance and the expectation of $R_i$ are $\sigma^2_i$ and ...
0
votes
1answer
42 views

portfolio optimization with uncertain returns

What is the usual method of dealing with many uncertain mean returns in portfolio optimization? For example say you have a 3 asset portfolio with assets A, B and C. All the correlations and variances ...
3
votes
3answers
122 views

What to use as portfolio diversification measure?

Suppose that we have a portfolio of $n$ assets. A perfectly diversified portfolio is one in which each asset has equal weights, i.e. each asset has weight $\frac{1}{n}$. Of course this is usually not ...
3
votes
2answers
180 views

correlation for portfolio of stocks

I have a portfolio of stocks and all I want to do is to make sure that I'm not trading one big position, so I would like to monitor some type of metric that gives me a rough idea of what the overall ...
0
votes
1answer
67 views

Computing the minimum variance portfolio

Given two risky assets and their corresponding covariance matrix, how do I compute the global minimum variance portfolio, its standard deviation and its expected return?
3
votes
1answer
116 views

Regime Switching for Dynamic Correlations

I would like to implement a Regime Switching for Dynamic Correlations in an out-of-sample analysis using MATLAB. After looking at the literature on the subject, they all refer to an article by Denis ...
4
votes
1answer
94 views

Can I add the greeks of individual postions to obtain greeks for the portfolio

I understand that the delta of an option portfolio is just the sum of the deltas of the individual option positions. What about the other Greeks like gamma and vega? Do the vega and gamma of a ...
1
vote
1answer
44 views

On a source for a mean-variance portfolio optimization result

In the context of a mean_variance framework consider an optimizing investor who chooses at time $T$ portfolio weights $w$ so as to maximize the quadratic objective function: $$U(w) = E[R_p] - ...
1
vote
1answer
84 views

Why model the variance-covariance matrix as an inverse-Wishart distribution in bayesian portfolio analysis?

I am following Risk and asset allocation (Attilio Meucci,2007). I must say I am enjoying this reading quite a lot so I hope nobody takes my question as a critique on the text. When we are introduced ...
2
votes
1answer
80 views

On learning the bayesian approach to portfolio optimization

I am required by my course to write a small paper on the Bayesian approach to portfolio optimization, I am following Applied statistical decision theory [by] Raiffa, Howard. Which can be consulted ...
1
vote
0answers
26 views

Multi-objective optimization: Where to find qualified examples for portfolio management?

I am looking for qualified examples of multi-objective optimization applied to a portfolio management situation in non-normal markets. Where can I find one or more examples of such a multi-objective ...
0
votes
0answers
45 views

Portfolio Performance Metrics

In comparing different long portfolios in stocks for 15 quarters, where at each quarter I re-balance the portfolio. So what I have done is made a function that outputs the rand value of the portfolio ...
0
votes
0answers
117 views

Black-Litterman with simple portfolio

In an attempt to learn Black-Litterman I have come across this "simple" example. Suppose that you analyze market data using CAPM $$r_i-r_f=\beta_i(r_m-r_f)+\epsilon_i$$ Suppose there are 2 assets in ...
-1
votes
1answer
90 views

Equall Risk Contribution and The Most Diversified Portfolio [closed]

I am a master degree student on applied economics at Brazil and my thesis will be about smart beta strategies. I pretend to apply Equal Weigth, Mininum Variance, Most Diversified Portfolio and Equal ...
0
votes
2answers
141 views

Investment: Bond vs Equity

I was talking to a friend recently and he asked me the following question. If I have a device which perfectly (with 100% accuracy) predicts that both a bond (e.g. AAA rated government bond) and the ...
3
votes
1answer
125 views

Black-Litterman example

I'm trying to learn Black-Litterman. I feel like I get the overall idea from books like Risk and Asset Allocation by Meucci as well as some of the early papers which develop the model. What I would ...
3
votes
1answer
164 views

Bayesian or Frequentist in Finance?

I'm currently an undergrad at a Canadian university and our finance courses has been brought up through the frequentist approach (ols, hypothesis testing, sampling theory). Only recently, through ...
4
votes
1answer
142 views

Historical Financial Statement to Backtest in R

I would like to preface this by saying I am preparing for an upcoming internship this summer so I am extremely new to Quant Finance. At my university we have access to Datastream by Thomson Reuters ...
5
votes
2answers
142 views

Portfolio Optimization to include ALL Securities?

I'm currently optimizing portfolio weights for an investment team with N stocks. We buy stocks with a conviction it will generate a return and it is up to me to determine weighting. However, with ...
1
vote
0answers
98 views

Risk measures, Risk Management and Financial Risk Area

I'm currently searching material about market risk and I learned about coherent risk measures, VaR, CVaR (or expected shortfall), volatility. All that because I have to make a Financial Risk Area for ...
2
votes
0answers
25 views

Sharpe Ratio for loans

I am trying to calculate the sharpe ratio for a set of loans. These loans have already matured and I know if they were good or not: grades are the different grades of the loans. interest rate is the ...
2
votes
1answer
74 views

Is an arbitrary prior for Black-Litterman valid? Or do we need a market implied one?

I went through The Black-Litterman Approach: Original Model and Extensions - see also. The BL approeach starts with a prior on the expected returns vector derived from the hypothesis that the market ...
0
votes
0answers
68 views

What is the most elegant way to write a trading (or asset selection) algorithm in MATLAB, based on a simple criterion?

Assume a $T \times N$ matrix $X$ of values for an asset characteristic at time $t \in \{1,2,\dots,T \}$, where $T$ is the observation period in months and $N$ is the number of assets and a ...
1
vote
1answer
42 views

In theory historical performance of a portfolio

I am looking at the quantitative model our team is using for analyzing the performance of a portfolio of stocks. However I don't understand what the model is trying to achieve. The model is supposed ...
1
vote
0answers
61 views

Model-independent dynamic portfolio optimization techniques

For a problem where we need to optimize the portfolio based on the data, going for Markowitz MPT has the following advantage: we only have to estimate mean and covariance to find optimal weights. I'd ...
2
votes
1answer
68 views

An Alphabet Effect?

While I prepared some quick and lazy charts picking just the first 10 symbols out of the SP500 for this other question I observed, that the first 10 symbols (figure 1) actually outperformed the larger ...
2
votes
4answers
202 views

Portfolio Optimization using S&P Universes

Assuming a set portfolio optimization problem, if all optimization inputs are kept constant, what would you expect, in terms of results, if you run the same optimization using the S&P500 as ...
1
vote
2answers
71 views

Weighting with restrictions, but no clear objective function?

I have 40 shares in an index and I want to weight them based on their market value, define the known value as $x_i$ In the traditional way, the weight of each share is calculated as: $w_i = x_i / ...
2
votes
3answers
143 views

Calculate bond returns from yields

I have to construct and evaluate portfolio of bonds and stocks, namely I need to get return on portfolio, standard deviation and sharpe ratios. I have weekly data that contains stock prices, and I ...
5
votes
4answers
573 views

Is there anyone still using Markowitz modern portfolio theory?

I was reading about the MPT (Use standard deviation as risk measure) on "Mathematics for Finance by Marek Capinski". I was just wondering is there anyone actually applying this theory to their ...
2
votes
0answers
59 views

seasonality and generalized additive model

I am reading a report which talks about seasonality. There is a chart showing the average returns for each month of the year. In the chart it appears the last 3 months of the year tend to be negative. ...
-2
votes
1answer
55 views

Two assets with the same mean and standard deviation - Would there be any benefit? [closed]

If I have two assets in a portfolio with the same standard deviation and mean and the correlation between the assets is 0, theoretically could there be a situation where it would be beneficial to ...
1
vote
1answer
39 views

MPT and the connection to asset prices / initial capital

I have some question about MPT. Suppose we want to build a portfolio given $N$ assets: $A_1,\dots,A_N$. At time $t$ we build the portfolio using MPT, which yields some weight vector ...
1
vote
0answers
46 views

how to find CVaR/AVaR for triangular fuzzy no

While going through different methods of risk measure i came across AVaR/CVaR, while i was calculating AVaR/CVaR in credibilistic environment using VaR, i got stuck in the calculations eg. For ...
1
vote
1answer
187 views

Estimate correlation of time series whose histories differ in length

Very often in quantitative analysis (e.g. calculating portfolio volatility) we have to analyze various time series - mostly returns - whose lenghts differ. Risk systems usually apply a one-factor ...
0
votes
0answers
64 views

multi factor equity model exposures not as expected

I'm researching an equity multi factor model. It contains three factors, say A, B & C. The factors are weighted as such, ...
1
vote
2answers
193 views

M&A hedging an equity portfolio against an index

Quick Note This question was already posted under the userID user8170. Reason being I could not access my account. Now I am able to login to my account I am reposting the question here and will ...
4
votes
1answer
170 views

factor models and using cross section regression

I have been doing some reading on factor models. In the literature it mentions that when creating a portfolio that maximises particular attributes it may lead to unwanted bias to other factors. I ...