I am working on performing factor analysis on a loan portfolio. This is my understanding so far, and I was hoping that some of the smart folks here might be able to chime and guide me through this process.
Modern Portfolio Theory - Assets should be assembled such that the expected return is maximized for a given level of risk. Also, the return should not be assessed by itself, but by how it contributes to a portfolio's overall risk and return.
CAPM - Helps in determining the theoretically appropriate required rate of return of an asset to ensure a diversified portfolio.
Multiple Factor Models - Asset Pricing Models that can be used to estimate the discount rate for the valuation of financial assets. (extension of CAPM)
Sharpe Ratio - Measures excess return per unit of deviation in an investment asset or a trading strategy.
What does my data look like: short term loan information and how they were paid back.
My question for the smart people here is, how do I proceed? It seems like I understand the concept of what factor analysis is, but have difficulty tying it to the data.