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seen Mar 14 '13 at 21:11

Feb
27
comment Threshold calculation for buying a mean-reverting asset
An interesting paper could be: Yingdong Lv & Bernhard K. Meister: Application of the Kelly-Criterion to Ornstein-Uhlenbeck Processes. But they don't have the a finite time deadline. However, you could use their results to estimate the optimal trading strategy and do some Monte Carlo to incorporate the finite time horizon. However, I have to say that I didnt read the paper in detail.
Feb
23
revised Taylor series expansion (Volatility Trading book) explanation sought
deleted 203 characters in body
Feb
23
comment Taylor series expansion (Volatility Trading book) explanation sought
The author of the book "Volatility trading" (there will be a new edition in 2013) is quite active on nuclear phynance, there is even a long thread on the book: nuclearphynance.com/Show%20Post.aspx?PostIDKey=110391
Feb
22
revised Taylor series expansion (Volatility Trading book) explanation sought
deleted 15 characters in body
Feb
21
answered Taylor series expansion (Volatility Trading book) explanation sought
Feb
21
revised Taylor series expansion (Volatility Trading book) explanation sought
I changed small delta to capital delta as this is the more common notation and also like in the book mentioned, some minor change to subscripts in addition
Feb
21
suggested suggested edit on Taylor series expansion (Volatility Trading book) explanation sought
Jan
24
comment Robust-Bayesian optimization in Markowitz framework
Continuing the last comment: This gives us $-|\chi||\omega|$ (because $\cos(\delta)$ is $-1$ at that angle). If we now use the notation $\chi=|\chi|$ and $\chi$ being in the interval $[0,1]$ by assumption, we arrive at equation (3). Does that explanation help?
Jan
24
comment Robust-Bayesian optimization in Markowitz framework
From eqn (2) to (3), we want to have the worst possible r. The first term on the right side of (2) is constant in our setting given our initial $\vec{\alpha}$ and $\vec{\omega}$. Now, we want to reduce that by as much as possible. In $\chi'\omega|\alpha|$ |\alpha| is again constant, so we are looking for the smallest value of $\chi'\omega$. This can be written as $|\chi||\omega|\cos(\delta)$ with $|\chi|$ and $|\omega|$ the length of the vectors and $\delta$ the angle between them. This is minimal for $\delta=\pi$ (ie both vectors have 180 degrees between them and look in opposite directions)
Jan
24
revised Robust-Bayesian optimization in Markowitz framework
Added the next equation in the Golts and Jones (2009) working paper and numbering of the equations
Jan
24
comment Robust-Bayesian optimization in Markowitz framework
Regarding the references, I just glimpsed over the nice working paper from Golts and Jones (2009) you cited and the pdf version of an article by Goldfarb and Iyengar (CORC Technical Report TR-2002-03 Robust portfolio selection problems). There, equations (4) and (15) seem to state the same result. Regarding the mathematical steps, I will edit my answer
Jan
24
awarded  Yearling
Jan
24
revised Robust-Bayesian optimization in Markowitz framework
now the derivation is more precise, also improved formatting
Jan
24
revised Robust-Bayesian optimization in Markowitz framework
added 47 characters in body
Jan
23
revised Robust-Bayesian optimization in Markowitz framework
Better wording and notation
Jan
23
revised Robust-Bayesian optimization in Markowitz framework
added 3 characters in body
Jan
23
revised Robust-Bayesian optimization in Markowitz framework
Better formatting and wording
Jan
23
revised Robust-Bayesian optimization in Markowitz framework
Better formatting and wording
Jan
23
answered Robust-Bayesian optimization in Markowitz framework
Aug
21
awarded  Nice Answer