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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208 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 ...
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1answer
233 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 ...
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1answer
118 views

What is the smart way to reallocate money?

We are running a portfolio of fund managers in our fund. When one of the managers hits the max DD constraint we pull money from this manager. This may happen in the middle of the allocation period and ...
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1answer
285 views

Minimum variance hedge with more than one asset

My portfolio comprises of 3 assets A,B,C that are correlated and the variance-covariance structure is known. At any given point in time, my position in Asset A say is given to me. I need to ...
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1answer
680 views

Does amortization of bond start accumulating on trade date or settlement date?

I am sorry if this is not appropriate here. We are building a wealth management system and I really would like to know whether amortization of bond start accumulating on trade date or settlement date ...
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1answer
23 views

Are financial returns considered more volatile in recessionary times as opposed to expansionary times?

I need help in understanding some results that I have obtained. I am doing some out-of-sample performance analysis for different targets of volatility in mean-variance optimization where I solely ...
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1answer
41 views

given someone's past investing history, is there a way to calculate his risk aversion?

given someone's past investing history, is there a way to calculate his risk aversion? Say, we know this client's investment history for example his past return, is there a way to calculate his risk ...
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1answer
44 views

Portfolio optimization - maximize variance with exposure to risk factors equal to zero

Optimize a portfolio such that the exposure to risk factors is zero and the variance is maximized (instead of traditional minimization problem). so the optimization problem look like: ...
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1answer
52 views

Parametric bootstrap in generating returns and hypothesis testing

I am trying to test a hypothesis of a statistic calculated from portfolio returns. To do so I estimate a model on the original returns series and want to obtain 100 bootstrapped series using ...
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1answer
29 views

What is the difference between group and inequality constraints in Matlab?

Sorry if this seems stupid. I was wondering what the difference between a group and inequality constraint is in Matlab. As far as I can tell they are the same: From Matlab ...
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1answer
244 views

How to answer this interview programming question about drawdowns?

I saw this question as an interview, and to be honest, I have no idea what it's even asking for: Write a function (in R or Python) that finds the stock drawdown which will trigger a rebalance, ...
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1answer
55 views

Calculating Fees (Kane, Marcus, and Trippi)

Having read a chapter in Bodie, Kane and Marcus' Investment, I came across a formula I do not quite understand. It states that the percentage fee in excess of what an index fund would charge on active ...
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1answer
398 views
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188 views

Selling an American call option early

I understand it is never optimal to exercise an American call option early. [1] [2] However, here are my two contradictory thoughts about selling an American call option early. Assumptions I can ...
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1answer
44 views

How to reason about leverage in terms of elasticity

Return of an investment for a given period is by definition: $$r = \frac{P}{W_0} - 1$$ where $P$ is the price of the investment at the end of the period, and $W_0$ is the initial investment. I want ...
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1answer
208 views

Expected length and depth of drawdown

Does anyone know of any model to estimate the distribution of drawdown length and depth assuming a certain portfolio dynamics? The arcsine law seems to suggest that a portfolio can spend a large ...
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2answers
1k views

Multi asset option portfolio risk management (greeks and FX exposure)

I am running an options book containing listed options across multiple products. I trade mostly equity and index related options - with a preference for European expiration products. I trade products ...
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0answers
31 views

calculating long short portfolios currency exposure

I have calculated the currency exposures of a long short portfolio simply by summing the weights of each stock. However I was told that I need to incorporate the dollar borrowing (short dollars), I ...
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0answers
17 views

How to Rank assets in Portfolio? [closed]

I am working on active equity Portfolio. I have total 30 securities in my Portfolio. Can someone please guide me how can I rank those assets in my portfolio. ...
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0answers
28 views

Under which conditions the minimum variance portfolio involves no short selling?

If $\rho_{12} < 1$ or $\sigma_1 \not= \sigma_2$ then $\sigma_v^2$ representing the variance of the portfolio with weights $(w_1, w_2) = (s, 1-s)$ as a function of $s$ attains its minimum value at: ...
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0answers
86 views

Determining the investment strategy

I have the following problem: Consider the 5 year investment strategy and given the yearly portfolio returns $S_{t+1}/S_t$ and dividends $D_{t+1}$ paid at $t+1$ which are modeled as: ...
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0answers
29 views

Can anyone suggest book about fixed-income portfolio management? [closed]

Can anyone suggest books about fixed-income portfolio management? Thx
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0answers
34 views

Disaggregating stock performance and dividend yield

I modeled the performance of several portfolios with adjusted close data and would now like to understand how much of it is driven by changes in stock price and dividend payouts. I have all the data ...
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1answer
291 views

“Hedging” a put option, question on exercise

I have a question on the following exercise from S. Shreve: Stochastic Calculus for Finance, I: Exercise 4.2. In Example 4.2.1, we computed the time-zero value of the American put with strike ...
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0answers
50 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 ...
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0answers
42 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 ...
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0answers
146 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 ...
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1answer
46 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 ...
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0answers
82 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 ...
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58 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 ...
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0answers
58 views

How to value a portfolio of non-mature consumer loans?

I'm looking for the best way to value a portfolio of consumer loans that have NOT reached maturity and for which I do observe the payment/default history to date? I'm working with a large database of ...
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1answer
185 views

How to projectP&L or drawdowns on pair trading , trading and portfolios? [closed]

This is for planning and risk management. I am stuck on the following thoughts - Back-test the trading strategy for a period similar to the one you expect and then project. Do the above using ...
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1answer
279 views

Plot Evolution of portfolio weights over time in R [closed]

Is there any function for plotting the evolution of portfolio weights over time in r?. I have a matrix of portfolio weights from an equal weighting strategy at rebalancing times and want to plot ...
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0answers
42 views

evaluating portfolio performance without knowing the amount held on cash accounts

I would like to evaluate the performance of a portfolio mananger. I know his trades, and the initial portfolio holdings. I do not know, however the amount held on his cash account. That is, I ...
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0answers
70 views

I want to optimize an equity portfolio for the four central moments can anyone help me with the problem formulation

Basically i am confused as to which formula to use for portfolio skew and kurtosis and how to use the same in the optimization problem. I would also like to know the options available regarding the ...
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1answer
179 views

Resampled efficient frontier length of simulation

I was provided with a VBA program from my lecturer that applies the resampled efficient frontier. We have an investment horizon $T$ (6 years) and he uses a multivariate normal distribution with ...
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5answers
112 views

What can I use to measure of diversification?

I have to come up with a measure of diversification for trade (this can tie in closely to diversification as regards portfolios). Are there any well known measures of portfolio diversification?
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1answer
23 views

Which rate of return to use in portfolio weight estimation?

I am learning the basics of portfolio management. I am confused about different ways to calculate rate of returns mentioned in the text investment and portfolio analysis. There are three methods to ...
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3answers
105 views

What assets other than bonds are risk free?

I saw a question the other day that said Assume you have only two assets to build a portfolio. Name and explain three scenarios under which a completely risk-free portfolio can be formed? I ...
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1answer
92 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. ...
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1answer
80 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?
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2answers
160 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 ...
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1answer
119 views

investors hold efficient portfolios because generally they are risk averse

I'm trying to find a concept on this question,in my understanding investors differ on risk preference,the question said investors hold efficient portfolios because they are generally risk averse? ...
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1answer
76 views

Making portfolios better than others for a 16 week portfolio game? [closed]

I'm going to participate in a game of making portfolios. The objective of the game is to make the portfolio with the bigger ROI over 16 weeks. Over each week every player can see the ROI of each ...
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1answer
1k views

How to adjust local currency returns to US$/EUR return?

Iam doing research on return characteristics. As of today the scope of the research has changed from a local investor point of view to an international investor point of view. This basically means ...
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1answer
6 views

What is the u vector in the expression for the weights of the min variance portfolio

I was working on my finical math homework where I need to find the minimum variance portfolio. I need to use the following matrix expression. Nowhere in the class notes does the instructor say ...
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1answer
34 views

how to find the weights in a portfolio? [closed]

Compute the weights in a portfolio consisting of two kinds of stocks if the expected return on the portfolio is to be $E(K_v)=10\%$, given the following information on the returns on stock 1 and 2: $$ ...
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1answer
29 views

Reshuffling the weighting of assets in an investment portfolio

An investor has a £40,000 portfolio, 40% of which is invested in bonds.The investor wishes to add funds to the portfolio by purchasing bonds so that 52% of the entire portfolio is invested in bonds. ...
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1answer
251 views

How to calculate annualised tracking error?

I have 36 months of relative returns and I need to calculate the annualised tracking error. So, using 36 months of returns is it simply like below: ...
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1answer
57 views

Isolating single assets standard deviation in a portfolio accounting for correlation

I am running a simple Monte Carlo analysis in Excel using mean return, standard deviation and the =NORMINV(RAND(),mean,std dev) method. I have a correlation matrix that I use to compute the portfolio ...