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Questions tagged [portfolio-management]

The professional management of an investment portfolio of various securities (shares, bonds and other securities) in order to meet specified investment goals. The process includes the specification of investment objectives and constraints, choice of asset mix, formulation of portfolio strategy, selection of securities, execution, revision, and evaluation.

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Optimization procedure for entropy pooling

I was wondering if those who used the entropy pooling code provided by Attilio Meucci had issues with the optimization procedure (especially regarding the fminunc function in Matlab). When I stress ...
Bytesize's user avatar
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Unwinding a Portfolio

I have a portfolio ${\mathbf P}$ made up of positions $n_i$ in each of $N$ securities, which I'm assuming are jointly normally distributed with means $x_i$, and covariance matrix ${\mathbf M}$. ...
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Is there a standard method of scaling alpha forecasts to t-cost estimates?

Given a set of monthly alpha forecasts (i.e. standardized z-scores from a multi-factor return model) and a non-linear market impact model (or more specifically, its piecewise-linear approximation), is ...
michaelv2's user avatar
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How to implement an “Active Long Volatility” Strategy?

The research paper "The Allegory of the Hawk and Serpent" describes an asset allocation referred to as the "Dragon" Portfolio, which allocates 18% to "active long volatility&...
Ramón J Romero y Vigil's user avatar
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Is the exponential Shannon entropy sub-additive?

In a recent paper of Salazar et al. (2014), The Diversification Delta: A Different Perspective, forthcoming in the Journal of Portfolio Management , the authors propose to use the exponential Shannon ...
Nathan L's user avatar
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Analyzing the angle between vector of weights and vector of returns in mean-variance optimization

I am using the paper "A Sharper Angle on Optimization" by Golts and Jones (2009) as a basis for my (minor) masters thesis in mathematical finance. The paper focuses on the mean-variance analysis of ...
Geraldine Bailey's user avatar
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116 views

Evaluating estimate of covariance matrix

I am testing out different methods / shrinkages to estimate a covariance matrix and I am wondering what is the best method of comparing the estimated covariance matrix to the true covariance matrix (...
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4 votes
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Principal Portfolios Prediction Matrix estimation (Bryan Kelly)

I have recently discovered Bryan Kelly's paper on Principal Portfolios (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3623983) and had some doubts about the prediction matrix $\Pi$. He defines $\...
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Brinson attribution for arbitrary set of style factors (size, momentum, vol, etc)

I'm looking to do a Brinson performance attribution on a portfolio of stocks where instead of decomposing the returns in terms of sectors we use factors instead. Basically, I want to do what Style ...
spence.j.moran's user avatar
4 votes
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136 views

difference between Meucci fully flexible probability and markov regime swtiching models?

What is the difference between A. Meucci's Fully Flexible Probability (FFP) and Markov Regime Switching Models ? They seem very similar to me, FFP based on state variables that define regimes will ...
annkepan's user avatar
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Active risk management of private assets

It seems incredibly difficult to not only come up with a list of options for active risk of private assets (Private Equity, Private Credit, Infrastructure, Real Estate, etc.) but also get senior ...
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How to deal with benchmark timing in quantitative portfolio management?

In Grinold & Kahn (2000), the authors emphasized the separation of stock selection and benchmark timing in active portfolio management. So if we avoid benchmark timing, the optimal portfolio's ...
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Studies on performance comparison of portfolio theories?

Are there any papers doing as broad as possible comparison of various portfolio theories performance? For example, compare specific theories: MPT Risk parity Black-Litterman etc or compare models: ...
ruslaniv's user avatar
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290 views

Statistical significance of mean returns between two portfolios

Suppose I have developed two versions ($A$ and $B$) of a factor model for ranking stocks. Both versions of the model use the same scoring system: stocks are percentile ranked within a given universe ...
spence.j.moran's user avatar
3 votes
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727 views

How to calculate Turnover Ratio of a scaled Portfolio

I want to calculate the Turnover of my scaled Momentumportfolio (Barroso und Santa-Clara 2015) They described Turnover Ratio with the following formula: While i understand the general concept (...
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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 ...
Julien Tabulazero's user avatar
3 votes
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Greeks for a portfolio? PnL for gamma trading

I am a little bit confusded with respect to the PnL of a delta-neutral portfolio. We have $$d\Pi = \Theta dt + \frac{1}{2} \Gamma \Delta S^2$$ So, if our portfolio consists of 1 call options, and ...
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What are examples of boosting, bagging, stacking or subspace method in quantitative finance?

The above ensemble methods appear useful in several machine learning competitions, like Netflix prize or KDD. They work by diversifying between several model variants. Are they also useful in ...
Mark Horvath's user avatar
3 votes
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872 views

subadditivity of VaR

It is known that the VaR (Value at risk) doesn't fulfill subadditivity, i.e. $VaR(X)+VaR(Y) \le VaR(X+Y)$ But for elliptical distributions subadditivity is true. Questions: (1) Which ...
user20707's user avatar
3 votes
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268 views

Non-parametric estimator - CVaR / Expected shortfall

Is the estimation of the CVaR using known non-parametric methods (histogram, kernels) different than the estimation of any other R.V.? If the answer is yes, I am interested to know whether there are ...
pollJ36's user avatar
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Portfolio insurance strategy with path dependence

I have the following problem. Let us assume that $S_t$, the stock price follows, geometric Brownian moation with parameters $(\mu,\sigma^2)$. We are given an amount of money $M$ and at each point in ...
Richi Wa's user avatar
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267 views

Ledoit-Wolf portfolio weights calculation

I am trying to implement the Ledoit-Wolf minimum variance portfolio strategy on a real-world stock dataset. ...
rty's user avatar
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3 votes
0 answers
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conferences for credit portfolio managers

What are worth conferences for credit portfolio managers? I appreciate your recommendations! PS:I am aware that this question is not the typical quant.SE question, BUT I couldn`t find reliable ...
Carol.Kar's user avatar
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0 answers
51 views

Clarification of Saturation-Reset Regimes

I have worked my way through this article, waiting to get into school I have been self-learning a bit. I have a good grasp on most of the article, but the component strategy of Saturation and Reset ...
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0 answers
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Optimize an equity portfolio for the four central moments: problem formulation

Basically i am confused as to which formula to use for portfolio skew and kurtosis and how to use the same in the optimization problem. I would also like to know the options available regarding the ...
Sai's user avatar
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0 answers
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How to correctly construct a value- and equally weighted portfolio consisting of property-types?

A problem of which I couldn’t find the answer on the forum is about the construction of equally-weighted and value-weighted portfolio. I want to compute the equally-weighted property-type portfolio ...
Maximos's user avatar
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2 votes
0 answers
42 views

Intuition behind portfolio weights with lower RMSE but higher variance

I have recently encountered a phenomena in portfolio optimization that has baffled me for days. I was experimenting with different ways of transforming a covariance matrix to get a stable minimum ...
Jay's user avatar
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2 votes
0 answers
39 views

Determine if stocks are hurt by rates or recession fear

Looking at a portfolio of growth stocks which traded at high multiples until end of last year. Stocks have been underperforming (no surprise there) but I'm trying to find ways to determine, ...
tweedi's user avatar
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2 votes
0 answers
60 views

Do options have diversification benefit?

Imagine the universe where we have one investable volatile asset but with an available liquid options chain for it. The question: can a portfolio consisted of this asset, and some options have any ...
Nikolay Rys's user avatar
2 votes
0 answers
1k views

Replicating portfolio with stock, bond and call option

I am trying to interpret: I am having trouble interpreting the replicating strategy: Context: $\phi$ is a generic payoff function, 0 < S < $\infty$, assumed throughout to be twice ...
myfinm1199's user avatar
2 votes
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129 views

When to remove a trading strategy?

Every strategy has a limited lifespan. How do you decide when to stop a particular strategy as it has lost its edge? Few of things that can be thought is strategy crossing its maximum drawdown, net ...
Aditya Jain's user avatar
2 votes
0 answers
49 views

Which performance evaluation measure to assess "Connectedness Matrix" based porfolios?

1. Question Which performance evaluation measure would be best to assess the portfolios built on 'connectedness matrix'? The connectedness matrix is the concept introduced in the academic paper "...
Eiffelbear's user avatar
2 votes
0 answers
92 views

Do you have any examples of 2 assets that are non linearly correlated? And any models that calculate portfolio risk based on non-linear correlation?

Do you have any examples of 2 assets that are non linearly correlated? And any models that calculate portfolio risk based on non-linear correlation?
Victor Gl's user avatar
2 votes
0 answers
420 views

Maximum Sharpe Ratio Portfolio

Conceptually, what are the drawbacks / unforeseen risks of running a portfolio whose weight are derived from what would have maximised the sharpe ratio over the previous time period (last 30 days) ?
Julien Tabulazero's user avatar
2 votes
0 answers
2k views

How to calculate "Differential Sharpe ratio"?

Instead of using the "sliding the time window" method of calculating the sharpe ratio under online framework, they've defined "differential sharpe ratio" as such But under equation 5, you can ...
Kevvy Kim's user avatar
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0 answers
180 views

Does Academic Research Destroy Stock Return Predictability?

McLean/Pontiff (2016) give evidence that portfolio returns are 26% lower out-of-sample and 58% lower after publishing an academic paper on variables, which are likely to predict cross-sectional ...
skoestlmeier's user avatar
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2 votes
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165 views

Mean-Variance portfolio: How do I compute the variance when the portfolio is normalized

Let's consider the very basic of a Mean-Variance Portfolio: $$ \text{max}_{x} (1-\lambda)\sum_i^n\mu_ix_i-\lambda\sum_i^n\sum_j^n x_i Q_{ij}x_j $$ $$\text{ s.t. }\sum_i^nx_i=1 \text{ , } x_i \geq ...
Kim's user avatar
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2 votes
0 answers
1k views

Calculating Ex-Post Sharpe Ratio

I'm trying to calculate an Ex-Post Sharpe Ratio for my portfolio and I would appreciate verification I'm doing it correctly. I have my portfolio's daily returns in one column and my benchmark's ...
Tyler's user avatar
  • 21
2 votes
0 answers
102 views

z-score of an active return with a no-volatility benchmark

I don't know how to approach the problem I am having. Basically, the statement I am trying to make is: the fund's return is X standard distribution away from the mean. Normally, for a single fund, ...
QFqs's user avatar
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2 votes
0 answers
876 views

Trouble computing the VaR for Student's t-distribution for a minimum-variance portfolio composed of four cryptocurrencies (BTC, ETH, LTC, and XMR)

I have modelled the time-series of daily log-returns from August 2015 to October 2017 of a minimum-variance portfolio composed of four cryptocurrencies (BTC, ETH, LTC, XMR) by fitting the data to four ...
Jayjay95's user avatar
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What is the state of the art in Capital Growth Theory?

I recently read Online Portfolio Selection: A Survey by Li & Hoi. I rarely hear OPS talked about in the quantitative finance community, aside from different types of mean-variance optimization. So ...
Thomas Johnson's user avatar
2 votes
0 answers
75 views

Subclass Tracking Error

I am currently doing a master program project regarding tracking errors. My assignment is to evaluate following question: How to find out the correlation structure of the passive (=second order/sub-...
tr_ad's user avatar
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2 votes
0 answers
301 views

OHLC Covarianc Estimation

Is there an R package which can estimate a covariance matrix using OHLC (Open/High/Low/Close) share prices for upwards of 40 shares using the Yang & Zhang method using daily data? I google ...
Alex's user avatar
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2 votes
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59 views

Given (past) stock values for N assets, how to find the maximum - theoretical - profit?

In the past few days I have been thinking about a question which seems trivial, yet I can't think of any efficient way to find the optimal solution... Here is the problem: imagine you have a ...
Federico's user avatar
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2 votes
0 answers
245 views

Risk measures, Risk Management and Financial Risk Area

I'm currently searching material about market risk and I learned about coherent risk measures, VaR, CVaR (or expected shortfall), volatility. All that because I have to make a Financial Risk Area for ...
rlartiga's user avatar
  • 165
2 votes
0 answers
193 views

Sharpe Ratio for loans

I am trying to calculate the sharpe ratio for a set of loans. These loans have already matured and I know if they were good or not: grades are the different grades of the loans. interest rate is the ...
fabmilo's user avatar
  • 121
2 votes
0 answers
161 views

seasonality and generalized additive model

I am reading a report which talks about seasonality. There is a chart showing the average returns for each month of the year. In the chart it appears the last 3 months of the year tend to be negative. ...
mHelpMe's user avatar
  • 259
2 votes
0 answers
364 views

Portfolio optimization with absolute position constraints

I'm looking to optimize a portfolio maximizing expected return for a particular risk budget, but with absolute constraints on the individual instrument positions. I've been experimenting with QP, ...
user5980's user avatar
  • 131
2 votes
0 answers
237 views

Looking for FpML best practices

We want start using FpML within our organisation; where message will be sent using FpML. What are best practices to do this ? If anyone who have used Tools as well as; i want to use FpML for ...
Ocean's user avatar
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2 votes
0 answers
120 views

How to Quantify Headwinds

What are some of the best ways to effectively measure headwinds for an open ended fund? Headwinds in this case refers to the amount of volatility contributed by a factor or a set of factors to a ...
Hay Fever's user avatar