Questions tagged [benchmark]

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Benchmarking of models

Why do we need benchmarking adjustmenets for a model? Suppose, a trading desk is using Heston model for generating vol surface, then why do risk management uses various other models like IR Mean ...
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65 views

Portfolio and Risk Management: Total Return Index vs Price Index

For portfolio construction and risk management purposes, when one should use Total Return based Index instead of Price Index? I am looking for pros and cons of using either Total Return and/or Price ...
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2answers
66 views

Custom benchmark construction (S&P500 + add-on)

If I have a strategy that has the same risk as S&P500 but also requires 150 bps on top of S&P500 Index, how would I construct such a benchmark? I have the following approach, but it is not ...
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1answer
50 views

Allow drift in weights in a risk benchmark?

I am tracking the risk of portfolios using a standard 2-asset benchmark (S&P500 / Agg bond) and I want to throw a flag if the risk of a portfolio goes outside of a certain range relative to that ...
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3answers
581 views

What is the appropriate benchmark for a Long/Short VIX futures strategy?

Trying to figure out the benchmark for a L/S Vix futures stragegy, doesn't seem like only long or short Vix futures would be appropriate, any ideas? Thx
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2answers
142 views

Best practice approach for computing beta

I was wondering how one should choose parameters such as "frequency" of returns (daily, monthly etc.), "time frame" (1 or 3 or 5 years of historical data etc), benchmark (same of the portfolio or the ...
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1answer
221 views

What's the most accurate benchmark index for US corporate and treasury bonds

I'm looking for an index for US corporate bonds and US treasury bonds to benchmark my strategy. I could easily use some ETFs as the benchmark for the recent years but I need data for the time range <...
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0answers
38 views

Benchmarking of Portfolio weights

I have 5 stocks and a commodity in my portfolio which I have allocated based on maximum Sharpe Ratio optimization. I need to benchmark them against an Index and compare the portfolio weights. How do I ...
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0answers
55 views

Benchmarking a foreign portfolio with SPY?

Here is something I'm struggling with for a few days now. I'm an European individual investor managing a small portfolio in EUR. However I mainly hold US securities, in USD. I do not hedge my exposure ...
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1answer
90 views

Benchmark value for American Options under stochastic volatility

Does anyone know any kind of method that produces reasonably well results for American Options under Heston Model setting that could be used as benchmark value? Since right now my goal is to ...
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2answers
97 views

What is a definition of “Benchmark”?

The word "benchmark" is often used in Finance, but in a rather fuzzy manner, there for a rough idea of what it is, and how it is 'defined'. Can someone provide a rigorous and precise definition of ...
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1answer
463 views

AUD Swap Reference Rate?

So I understand that BBSW is the reference rate used in AUD swap transactions since AUD LIBOR has been discontinued. If I want to build a curve out of the reference rates used to price AUD swaps, I ...
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0answers
99 views

Hwo to create a benchmark for a portfolio?

How does one create a benchmark for a portfolio? I realize if I were using strategic asset allocation, I could just look at the already existing benchmarks associated with the various asset classes ...
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1answer
176 views

Comparing a money-weighted return of my own portfolio with a benchmark ETF/other portfolio that is subject to the same cashflows

I am able to calculate the money-weighted return (XIRR equivalent in Excel) of my portfolio. Whilst I can compare this with ‘headline’ returns of ETF’s, Mutual Funds etc, I want to isolate the timing ...
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3answers
4k views

How to interpret the French-Fama SMB factor?

I regressed ten portfolios on the Fama French factors and get significant loadings on the SMB factor. However, if I look at the actual average market cap of these portfolios, the portfolios with the ...
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1answer
4k views

What is the difference between BBSW and AUD LIBOR?

I understand that BBSW is the reference rate for financial instruments while AUD LIBOR is the interbank rate benchmark. However, since AUD LIBOR has been discontinued due to the rigging scandal, can ...
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3answers
153 views

Is there a broad currency index just like there is an equity market index?

I would like to assess the performance of currency traders so I was wondering if there is a broad currency index that can be used as a benchmark to assess the performance of these traders. The index ...
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1answer
117 views

How to benchmark bonds?

I am trying to find for each european bond in my database a proper Benchmark to compare them with the Bloomberg benchmarks for bonds. What i have done so far is to extract a list of all government ...
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5answers
521 views

Is there any other way to measure option pricing model performance than proximity to market prices?

Short version Why do we take market prices as the prices to be estimated and predicted? The common answer is efficient markets hypothesis as in "Market agents do their best effort given their ...
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5answers
176 views

What is the motivation for index benchmark?

I know that many funds have local index (i.e., SPX in US) as their benchmark. Why are investors interested in such kind of returns instead of absolute returns. From the first glance I'd think one ...
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2answers
609 views

How to interpret beta meaningfully?

Although this is probably a basic question, this is probably also the right forum to post it in :) I thought I understood beta, but know I am really confused... The beta between my portfolio (weekly ...
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0answers
111 views

Benchmarking risk

Given the portfolio return $R$ and the benchmark return $B$, I want to define a risk indicator, measuring the ability to beat the benchmark ($R>B$), given the downside risk taken; the latter not ...
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0answers
252 views

Backtesting benchmark / control test design

I am designing a backtesting system to test an algorithm. I'd like to have a benchmark / control test results to compare to the results of a custom algorithm. A limited "set" of stocks is selected ...
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1answer
361 views

Whare are the common Global Asset Allocation indices?

I would like to make a comparison between some multi asset class strategies and some kind of benchmark. In this situation, the classic benchmarks like MSCI World (for Equitites), GSCI (for ...
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2answers
402 views

Resources for Benchmarking Automated Trading Systems available as deltix etc.?

Is there some research resource/group working on benchmarking of software products out there with automated trading and goals of "Advanced alpha generation and execution strategies" incorporating low ...
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3answers
1k views

What benchmark/index to use for backtesting a portfolio of stock options?

What benchmark should I use for backtesting a model for when I should buy an option of a particular stock? For equities, one could say their portfolio outperformed the S&P 500. I would like to ...
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3answers
1k views

How can an ETF outperform its benchmark index?

Deutsche Bank’s ETF platform, db X-trackers, provides a rather remarkable ETF tracking Euro Stoxx 50 (which is the most widely used regional blue-chip index in Europe). What makes it remarkable is ...
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1answer
520 views

How to select/construct benchmarks for black-box trading strategies?

When faced with a black box trading strategy with extensive historical data available, how would one select/construct a representative benchmark? As a trivial example, when a strategy historically ...