Questions tagged [minimum-variance]
The minimum-variance tag has no usage guidance.
2
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0answers
39 views
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!
3
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0answers
61 views
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 ...
7
votes
1answer
126 views
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:
\begin{equation}
w^* = (1^T_n\Sigma^{-1}1_n)^{-1}\Sigma^{-1}1_n, \\ s.t. \ \ 1^T_nw = 1
\end{...
1
vote
0answers
47 views
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
1answer
45 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 ...
0
votes
1answer
18 views
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 ...
0
votes
2answers
70 views
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 ...
2
votes
1answer
137 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 ...
10
votes
2answers
413 views
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.
...
1
vote
1answer
49 views
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 ...
2
votes
1answer
270 views
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 ...
2
votes
1answer
216 views
Computing the minimum variance portfolio
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?
4
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1answer
2k views
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 ...
5
votes
1answer
720 views
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 :
-...
3
votes
1answer
254 views
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 ...
4
votes
3answers
677 views
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 ...
6
votes
3answers
446 views
What is the canonical reference for Minimum Variance Portfolio's uniqueness?
I am writing a white paper in which I am trying to compare a strategy to different well-known - and classic - asset allocation optimization approaches.
One of the methods I chose is the minimum ...
