# Questions tagged [minimum-variance]

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### Minimum hedge variance ratio

If futures contracts are being settled daily, why do we regress percentage changes in spot price over percentage changes in future price to get the minimum variance hedge ratio when cross hedging? ...
106 views

### Risk free rate must be lower than expected return of global minimum variance portfolio

I heard a professor say: "We know the return of the risk free asset must be less than the expected return of the global minimum variance portfolio, otherwise there would be arbitrage ...
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### Portfolio Optimization with ETFs and Futures

I am looking to perform portfolio optimization with a single ETF (or two) and a VIX futures (with the possibility of adding an additional hedging instrument). Here are some features of my portfolio ...
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### Asset Management (Inverse Matrix, MVP,TP etc) [closed]

i just found this website and hope someone can help me. We have a midterm and we got 1 old exam but the Prof didnt want to provide the solutions and he is terrible anyway - so it kinda sucks, and i ...
156 views

### Calculation of break-even correlation for diversification effect in N-assets case?

I'm thinking about a generalization of the following case: for 2 assets, there is a diversification effect as soon as i obtain a positive weight for the minimum-variance portfolio in the asset with ...
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### Calibration of Covariance Matrix for a Cumulative Period Return

I am trying to compute optimized weights (minimum-variance portfolio) for a cumulative return over a period (weekly or fortnightly). In a daily return setting, it is quite simple, I just compute a ...
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1 vote
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### Robust estimates of variance covariance matrix

I am looking for help from other people with experience creating variance covariance matrix that have enough predictive power to actually lower portfolio volatility out of sample. Using real world ...
79 views

### Minimizing variance of market neutral portfolio given factor covariance matrix and stock return predictions

If I am given a return prediction and factor exposures for say 50 stocks, as well as the factor covariance matrix, what is the process to determine the weightings of the minimum variance portfolio, ...
77 views

### Can anyone help me to understand why the GMV point is not on the efficient frontier?

I am following a course about portfolio construction with Python. I am able to successfully draw the efficient frontier and capital market line (CML), and the global minimum variance (GMV) point using ...
1 vote
119 views

### Terminology: "global" in "global minimum-variance portfolio"

I am confused about the meaning of "global" in "global minimum-variance portfolio". The sources that I have encountered so far do not explicitly state what "global" means....
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### Minimum variance portfolio in Python

I have a portfolio or $N$ assets in $t=10$ days. ...
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1 vote
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### Do the wallet weights with the minimum variance need to be nonzero?

I wonder if we have n risky assets, does the portfolio with the minimum variance always have non-zero weights or can any weight be 0?
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1 vote
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### Portfolio/sub-portfolio optimization

I have a finite amount of 26 assets, the total amount of these assets needs to be allocated to 9 portfolios. Each portfolio has its own required return which needs to be met, using a min-variance ...
1 vote
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### Minimum Variance Portfolio Problem Python

I have a problem with the MVP-optimization and scipy. My code is the following. The Maximum-Sharpe-Ratio-Portfolio works. But if I want to optimise the MVP, scipy optimiser doesn't seem to work, ...
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### Portfolio Optimization and Global Minimum Variance Portfolio (GMV)

I have few questions about classic mean-variance-optimization in general. I have a series daily returns of 15 assets and I want to combine these assets in a portfolio. 1) Do you think that 1 year of ...
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### Residual Risk and Variance

I've solved part a, but am struggling with b and c. $x_m$ is the market portfolio vector, and I think $T$ should be a diagonal matrix. Any hints greatly appreciated!
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### Fixed Income portfolio type

Could someone kindly point me toward a primer that would cover the various type of fixed income portfolio strategies under modern portfolio theory ? In a nutshell, I would like to know what kind of ...
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### Finding a minimum variance portfolio when using a regulariser?

I am aware that the minimum variance portfolio of a market with $n$ securities can be shown to be: w^* = (1^T_n\Sigma^{-1}1_n)^{-1}\Sigma^{-1}1_n, \\ s.t. \ \ 1^T_nw = 1 \end{...
1 vote
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### Minimum Lower Partial Moment (n=2) hedging ratio

I would like to better have understanding on the minimum-LPM hedging. I have understood that the co-LPM matrix cannot be modeled by GARCH type models that are used to estimate to the covariance matrix,...
1 vote
64 views

### What price data should I used when making minimum mean variance portfolio, optimal risky portfolio and efficient frontier using Markowitz? [closed]

I need to make optimal risky portfolio, minimum variance portfolio and efficient frontier using Markowitz . But i don't know whether to used close price data or adjusted data. If i'm using adjusted ...
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### What is the u vector in the expression for the weights of the min variance portfolio

I was working on my finical math homework where I need to find the minimum variance portfolio. I need to use the following matrix expression. Nowhere in the class notes does the instructor say what ...
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### Portfolio Theory: Must VarCovar Matrix be based on return var/covar?

I am trying to estimate the minimum variance portfolio where the assets are currency derivatives. In the specific case it does not make sense to base correlations or variance on asset returns. I am ...
386 views

### How to calculate a hypothetical minimum-variance point?

If we have $N$ assets which are uncorrelated, but have the same mean return of $\mu$ but the variances are different where $\sigma_i^2$ is the variance of each asset $i = 1, 2,...,N$ how can you write ...
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### How to evaluate minimum-variance strategies against perfect information mvp

The minimum variance portfolio should minimize the standard deviation (variance) of the portfolio at time $t+1$. The covariance matrix $\Sigma_{t+1}$ needs to be estimated in order to form the mvp. ...
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### Portfolio Selection formulation

I was just wondering why in http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1601412 on page 22, the constraint (48) is a strict equality for the minimum variance formulation. Whereas in a different ...
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### How do I show that there is no tangency portfolio?

Question: Suppose that the risk-free return is equal to the expected return of the global minimum variance portfolio. Show that there is no tangency portfolio. A hint for the question states: Show ...
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### Computing the minimum variance portfolio for only two risky assets

Given two risky assets and their corresponding covariance matrix, how do I compute the global minimum variance portfolio, its standard deviation and its expected return?
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### Portfolio Optimization with Monte Carlo Simulation - How to do it with Excel?

If I have three asset classes and their historical weekly returns for five years, how can I construct a minimum variance portfolio and an efficient frontier plot with Excel? To do that do I have to ...
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### Electricity market : how to design an optimal hedging strategy using spot and futures markets for an industrial consumer?

Here is the problem : we should adopt the point of view of an industrial company which purchases electricity as an input in its production line and which wants to achieve the following two goals : -...
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### Minimum Variance Hedge Ratio in Binomial Framework

In order to find the minimum variance hedge ratio when holding a portfolio of vanilla call options and hedging with stock, you can do an OLS regression. In a binomial model framework, given ...
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### Are minimum-risk and minimum-variance portfolios equivalent?

When reading a paper by DeMiguel and Nogales (2007; http://papers.ssrn.com/sol3/papers.cfm?abstract_id=911596), I came across the following formulation: Comparing the proposed minimum-risk ...
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