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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13
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0answers
623 views

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 ...
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561 views

Computing Value at Risk for portfolio in R

I know how to compute VaR with long positions using PerformanceAnalytics. What about a portfolio consisting in two equities A and B, 100 USD long positions in each, and 2 stock options for the same ...
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139 views

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 ${\mathbf M}$. ...
9
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387 views

Market Maker portfolio management

I am interested in articles/strategies related to portfolio and inventory management for market makers and to management of order cancellation, updates of order, etc. Most of the strategies from ...
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1k views

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 ...
5
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112 views

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 ...
5
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425 views

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 ...
4
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120 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 ...
3
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47 views

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: ...
3
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0answers
67 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 ...
3
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71 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 ...
3
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817 views

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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179 views

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 ...
3
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243 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 ...
3
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93 views

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 ...
3
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210 views

Ledoit-Wolf portfolio weights calculation

I am trying to implement the Ledoit-Wolf minimum variance portfolio strategy on a real-world stock dataset. ...
3
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38 views

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 ...
3
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0answers
48 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 ...
3
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106 views

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 ...
3
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1k views

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 ...
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400 views

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&...
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691 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 ...
2
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0answers
222 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 (...
2
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0answers
83 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 ...
2
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39 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 "...
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84 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?
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317 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) ?
2
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0answers
766 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 ...
2
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0answers
136 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 ...
2
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99 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 ...
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0answers
746 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 ...
2
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0answers
78 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, ...
2
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0answers
442 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 ...
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0answers
79 views

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 ...
2
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558 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 ...
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65 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-...
2
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0answers
218 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 ...
2
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0answers
58 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 ...
2
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0answers
230 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 ...
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0answers
181 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 ...
2
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0answers
147 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. ...
2
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0answers
297 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, ...
2
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0answers
221 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 ...
2
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0answers
116 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 ...
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0answers
18 views

How to prove that the return criteria for adding an investment A to an existing portfolio can be represented using Sharpe Ratio Approach

How can I prove that the return criteria for adding an investment A to an existing portfolio can be represented as the below inequality using the Sharpe Ratio Approach for risk adjusted returns as ...
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0answers
31 views

Best bibliography on the classic Merton portfolio problem

I am writing a small section on my thesis about the classic Merton portfolio problem. I was wondering what are the best books on the subject. I am looking for something from the beginner to the ...
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0answers
75 views

From annualized Sharpe Ratio to number of daily losses

I have seen a few statements that link a particular annualised Sharpe Ratio to the likely frequency of 'loss day' across a given period: e.g. "A annualised Sharpe Ratio of X, implies the ...
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0answers
56 views

global minimum variance portfolio vs all-bond portfolio

I'm leaning portfilio theory and have got some questions. global minimum variance portfolio is defined as the leftmost point on the efficient frontier which suggest it is a all-bond portfolio if risk ...
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36 views

Controlling for factors that influence minimum variance optimization

I am trying to compare the performance of two minimum variance optimization (mvpo) methods applied on stocks Hierarchical risk parity (HRP) vs the analytical global minimum variance formula. I feel ...
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0answers
37 views

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 ...