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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326 views

Optimization procedure for entropy pooling

I was wondering if those who used the entropy pooling code provided by Attilio Meucci had issues with the optimization procedure (especially regarding the fminunc function in Matlab). When I stress ...
9
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0answers
201 views

Real world application of stochastic portfolio theory

There is a branche of stochastic portfolio theory (see also this question). Fernholz and Karatzas have published research in this field (e.g. "Diversity and relative arbitrage in equity markets") and ...
9
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710 views

Testing Valuation, Size and Momentum (proprietary factors) from 1988-2013: No evidence of driving cross-sectional returns

I am currently testing whether three proprietary factors - Valuation, Size and Momentum - explain cross-sectional returns. A sample of 3000 securities was tested using Fama-MacBeth two-pass ...
7
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0answers
177 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 ...
7
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0answers
335 views

Optimization: Factor model versus asset-by-asset model

In portfolio management one often has to solve problems of the quadratic form $$ w^T \Sigma w + w^T c \rightarrow Min $$ with portfolio weights $w \in \mathbb{R}^N$ a constant $c \in \mathbb{R}^N$ and ...
5
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0answers
305 views

Analyzing the angle between vector of weights and vector of returns in mean-variance optimization

I am using the paper "A Sharper Angle on Optimization" by Golts and Jones (2009) as a basis for my (minor) masters thesis in mathematical finance. The paper focuses on the mean-variance analysis of ...
5
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0answers
527 views

Is there a standard method of scaling alpha forecasts to t-cost estimates?

Given a set of monthly alpha forecasts (i.e. standardized z-scores from a multi-factor return model) and a non-linear market impact model (or more specifically, its piecewise-linear approximation), is ...
3
votes
0answers
54 views

subadditivity of VaR

It is known that the VaR (Value at risk) doesn't fulfill subadditivity, i.e. $VaR(X)+VaR(Y) \le VaR(X+Y)$ But for elliptical distributions subadditivity is true. Questions: (1) Which ...
3
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0answers
93 views

Non-parametric estimator - CVAR / Expected shortfall

Is the estimation of the CVAR using known non-parametric methods (histogram , kernels) is different than the estimation of any other R.V.? If the answer is yes, then I am interested to know whether ...
3
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0answers
115 views

Is Low-Volatility expensive these days? How can we analyze this?

Low volatility investing became somewhat fashionable in recent years. In general there are two approaches to this Ranking stocks of a certain universe by either stand-alone volatility or by beta and ...
3
votes
0answers
78 views

Portfolio insurance strategy with path dependence

I have the following problem. Let us assume that $S_t$, the stock price follows, geometric Brownian moation with parameters $(\mu,\sigma^2)$. We are given an amount of money $M$ and at each point in ...
3
votes
0answers
30 views

conferences for credit portfolio managers

What are worth conferences for credit portfolio managers? I appreciate your recommendations! PS:I am aware that this question is not the typical quant.SE question, BUT I couldn`t find reliable ...
3
votes
0answers
44 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 ...
2
votes
0answers
41 views

How to understand quadratic finance or practice of Value-at -Risk(VaR)

We define the following notions for a jointly normally distributed random vector $P=(P_1,...,P_n)$ with f the density function. $$\mu=\int_{-\infty}^{\infty}(x_i-\mu_i)f_i(x_i)dx_i$$ $$\sigma^2_{ij}=...
2
votes
0answers
27 views

Subclass Tracking Error

I am currently doing a master program project regarding tracking errors. My assignment is to evaluate following question: How to find out the correlation structure of the passive (=second order/sub-...
2
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0answers
49 views

OHLC Covarianc Estimation

Is there an R package which can estimate a covariance matrix using OHLC (Open/High/Low/Close) share prices for upwards of 40 shares using the Yang & Zhang method using daily data? I google ...
2
votes
0answers
46 views

Given (past) stock values for N assets, how to find the maximum - theoretical - profit?

In the past few days I have been thinking about a question which seems trivial, yet I can't think of any efficient way to find the optimal solution... Here is the problem: imagine you have a ...
2
votes
0answers
87 views

Ledoit-Wolf portfolio weights calculation

I am trying to implement the Ledoit-Wolf minimum variance portfolio strategy on a real-world stock dataset. ...
2
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0answers
62 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
0answers
87 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
0answers
177 views

Portfolio optimization with absolute position constraints

I'm looking to optimize a portfolio maximizing expected return for a particular risk budget, but with absolute constraints on the individual instrument positions. I've been experimenting with QP, ...
2
votes
0answers
791 views

How to correctly construct a value- and equally weighted portfolio consisting of property-types?

A problem of which I couldn’t find the answer on the forum is about the construction of equally-weighted and value-weighted portfolio. I want to compute the equally-weighted property-type portfolio ...
2
votes
0answers
116 views

How to Quantify Headwinds

What are some of the best ways to effectively measure headwinds for an open ended fund? Headwinds in this case refers to the amount of volatility contributed by a factor or a set of factors to a ...
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0answers
33 views

Black Litterman: Is it possible to have multiple views (from different sources) on the same asset?

From the basics of Black Litterman I understand that each view on a stock is implemented via the pick matrix P with the expected value of the views in Q. I have read several papers where each stock ...
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0answers
26 views

Fund Separation Theorem for Performance Seeking Portfolio

Can someone explain this statement? "The beauty of the fund separation theorem is that the performance seeking portfolio mandate is the same for all investors"
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0answers
33 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
31 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: $\frac{S_{t+1}}{...
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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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0answers
51 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
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0answers
46 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 ...
1
vote
0answers
151 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 ...
1
vote
0answers
84 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 ...
1
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0answers
60 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
59 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 ...
1
vote
0answers
43 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 ...
1
vote
0answers
72 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 ...
1
vote
0answers
175 views

Looking for FpML best practices

We want start using FpML within our organisation; where message will be sent using FpML. What are best practices to do this ? If anyone who have used Tools as well as; i want to use FpML for ...
0
votes
0answers
21 views

help with p&L vectors historical simulation

My question is about the calculation of the Value at Risk based on historical simulation. I have a table which contains the P&L-vectors of each day of one year. But I don't know what is contained ...
0
votes
0answers
52 views

Physical interpretation of variance in returns in a portfolio design

I have a downloaded the log-returns at successive times of 98 stocks from S&P index over 753 days. I calculated the total daily return according to the formula 1 below, where ...
0
votes
0answers
23 views

How to Neutralize Portfolio across economic sectors and industries using modified Alpha?

I am reading about Alpha and Portfolio Construction topic while reading i came across below point. Active management should be easy with the right alphas. Sometimes it isn't. Most active managers ...
0
votes
0answers
23 views

Calculating portfolio returns from a dynamic, optimal re-balancing strategy

I am calculating a dynamic strategy with optimal re-balancing as in here. As a result of maximizing the expected utility function I obtain the weight for the risky asset in period $t=0$. All such ...
0
votes
0answers
12 views

One period optimizations with tcosts, few predictions and getting positions unstuck

Consider a one period portfolio optimization with objective that maximizes $\omega E(r) - \lambda_r\omega^t\Sigma\omega - TC$ Where TC is however we calculate tcosts/impact. Importantly, most ...
0
votes
0answers
21 views

Asset weights in asset allocation

I am trying to solve an asset allocation problem by approximating the expected utility of a portfolio. I am using the following formula: $E_t [U(1 + w_t' r_{t+1} + w_{ft} r_{f, t + 1})] = m_{1,t+1} - ...
0
votes
0answers
31 views

Calculating returns when number of securities in a timeseries varies over time?

I have a timeseries of security returns in which the number of securities in the timeseries varies over time. More specifically, I have a universe of events where securities(their returns) are added ...
0
votes
0answers
28 views

derive variance of a portfolio

I'm stuck on a derivation of the variance of a portfolio of securities $K_1,K_2$ formula The end result is $Var(K_v) = w_1^2Var(K_1)+w_2^2var(K_2)+2w_1w_2cov(k_1,k_2)$ Proof so far: Let $K_v = ...
0
votes
0answers
29 views

Approximating the conditional expectation in simulations

I am simulating stock returns, which are governed by the following equations $r_t = \mu + \delta r_{t-1} + \sigma_t z_t$ $\sigma^2_t = \omega + \alpha \varepsilon_{t-1}^2 + \beta \sigma^2_{t-1}$ $\...
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0answers
26 views

Academic definition of portfolio turnover

I'm looking for an academic reference on how compute the standard portfolio turnover used in finance. I found a definition by Barroso and Santa-Clara, however their definition is based on both the ...
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0answers
74 views

Asset allocation and GARCH models

I am trying to solve an asset allocation problem and I am having some troubles grasping the concept. I am working with excess returns on 4 stock indices and I am obtaining the excess returns forecasts ...
0
votes
0answers
20 views

Portfolio construction for signals of varying time scales?

Wondering if anyone is aware of any research on combining/portfolio construction of signals on different time scales. For example, if I have a trading signal (alpha) that generates trades every hour ...