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Jan
20
comment Black-Litterman, how to choose the uncertainty in the views $\Omega$ for smooth transitions form prior to posterior
You might also refer to Equations 21-23 in papers.ssrn.com/sol3/papers.cfm?abstract_id=1213325
Jan
20
comment What are the parameters of the function PORTVAR in Matlab?
Without looking at the source, I would guess that they use the Matlab function cov on the returns to get the covariance matrix. The only thing I'm not sure of is if they use the population or sample covariance matrix. You can think of this like what would have been the variance of a portfolio rebalanced in each time period.
Jan
17
revised Geometric Returns values less than -100%
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Jan
17
comment Geometric Returns values less than -100%
@Kamster Thanks for the correction. I mean the log differences, but didn't do the Latex right.
Jan
16
comment Geometric Returns values less than -100%
The 2 makes it annualized.
Jan
16
revised Geometric Returns values less than -100%
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Jan
16
answered Geometric Returns values less than -100%
Jan
13
comment Black-Litterman with simple portfolio
Two options. The first (and easiest if you generalize it) approach is to expand your mean and covariance to include the market. Then you can take the view directly. The second is to create a view on asset 1 that mimics this behavior. In particular, you'd take a view that asset 1 has a return of 40% (solving -60%=x-100%).
Jan
13
comment Black-Litterman with simple portfolio
Work through Idzorek's paper (the second thing that comes up when googling) corporate.morningstar.com/ib/documents/MethodologyDocuments/… it is pretty clear how to implement your example. If you can point to a specific thing that you're having trouble setting up, then I can help with that.
Jan
13
comment Log returns and GARCH models
@Ludo Check out this: symmys.com/node/85
Jan
13
comment Black-Litterman with simple portfolio
Have you tried googling for Black-Litterman. There are tons of examples out there.
Jan
3
comment Bayesian or Frequentist in Finance?
Frequentist is far more common. The best way to learn is reading books and then writing programs. In terms of what is better in practice, I think out-of-sample Bayesian and Michaud have better properties than Mean-variance.
Dec
31
answered Bayesian or Frequentist in Finance?
Dec
31
answered Bayesian estimation of asset pricing models
Dec
14
awarded  Popular Question
Dec
11
comment How to find the best fitting GARCH model for a portfolio composed of 3 ETFs in R?
I'm pretty sure you can output the likelihood on rugarch, which means it's not much additional work to get the AIC. Then just write a function to compare the fits.
Dec
7
revised How to extrapolate VaR?
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Nov
24
comment What are the canonical books for statistics applied to finance?
And his website has tons of support materials.
Nov
19
comment Different ways of portfolio optimization
@user8 I think James is pretty clear. For these problems, it is pretty easy to analytically show that they all produce the same efficient frontier. So for a $\lambda$ you could find a target return or target volatility problem that will produce the same optimal portfolio. Whether you want to use one or the other depends on what you're trying to do and what optimization software you have. Nevertheless, contra James I still could imagine a situation where I would optimize utility and still constrain variance or tracking error.
Nov
14
answered CVaR reformulation correct?