Tal Fishman
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 Aug 4 revised How do I graphically represent the evolution of a covariance matrix over time? fixed grammar and spelling, eliminated repetitiveness Aug 4 comment How do I graphically represent the evolution of a covariance matrix over time? Interesting idea. Do you have any references of how it can be adapted to correlation analysis? Aug 4 comment How does one analyze diversification if stock prices follow a Cauchy distribution? @vonjd I'm sorry, I would have listed them if I could remember where I read this, but I do not. I believe the result is both to be expected, as a result of the central limit theorem, and also in part a consequence of long-horizon mean reversion, as shown by DeBondt and Thaler (1985). Aug 4 comment How do I backtest a convertible bond arbitrage strategy in R/Matlab? @richardh, right, hence my update above. I have tried looking through RQuantLib, but as I commented to Brian Peterson's post below, the documentation is not exactly user friendly, hence my question. Aug 4 revised How does one analyze diversification if stock prices follow a Cauchy distribution? added link to previous question #115 Aug 4 comment Portfolio optimization with monte carlo sampling from predictive distribution Even though the predictive distribution is not normal, can it be modeled analytically or is it purely empirical? Aug 4 answered How does one analyze diversification if stock prices follow a Cauchy distribution? Aug 4 comment How do I backtest a convertible bond arbitrage strategy in R/Matlab? @richardh The tough part of these strategies is figuring out the Greeks (like options pricing). Aug 3 comment How do I graphically represent the evolution of a covariance matrix over time? @michaelv2 you are absolutely right, and in this case I took min(x,180-x) for the graph above. I think percentage variation explained is what quant-guy had in mind initially, and I plotted that as well, it is also helpful. Aug 2 revised How do I graphically represent the evolution of a covariance matrix over time? Added graphs to illustrate my implementation of Quant-Guy's answer Aug 2 comment How do I graphically represent the evolution of a covariance matrix over time? That's brilliant! I just tried it and it actually works really well to demonstrate major shifts in the correlation structure. Can we do some cleanup and incorporate your comment into your answer? Aug 2 accepted How do I graphically represent the evolution of a covariance matrix over time? Aug 2 comment How to quantify the impact of management cost on return? @hhh, I agree that EC is greater if the drift is positive (as in your example), and AC is greater if the drift is negative. No need for condescension. I am trying to help you work out the problem by defining the terms, or at least finding a reference where these terms have been defined. We can delete this and post a summary of my questions on your question as a comment if you like. However, you still have not answered most of them, and I think it will be difficult for anyone not familiar with this exact problem to help you solve it without those answers. Aug 2 comment How do I graphically represent the evolution of a covariance matrix over time? I think you misunderstood my question. In my case, it is pretty clear to me what the relationships are between the variables, and in fact I have already plotted dendrograms to investigate this. However, it is not clear how I can examine changes in the inter-relationships over time. $T$ is about 600 in my case, so clearly drawing a minimum spanning tree and/or dendrogram at each point in time is not practical. Aug 2 comment How to quantify the impact of management cost on return? @hhh I haven't been able to find any references, so links would be helpful. Working out some of the math on my own, it would seem that if the charging function is affine (which it usually is) and the price process has zero drift (which is close to true for the horizons involved), then the economic and accounting cost are equal. Aug 2 asked Why are exotic options most popular in FX? Aug 2 comment How do I backtest a convertible bond arbitrage strategy in R/Matlab? Thanks for the info, but I was looking for specific info about convertible bonds (see update). I have tried searching the various R tools, but they are not exactly user friendly, hence my question. Aug 2 revised How do I backtest a convertible bond arbitrage strategy in R/Matlab? clarified question is regarding CB backtesting, not general backtesting Aug 2 awarded Revival Aug 1 asked How do I graphically represent the evolution of a covariance matrix over time?