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.

Filter by
Sorted by
Tagged with
3
votes
0answers
110 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 ...
0
votes
0answers
36 views

Immunization of Portfolio of Bonds

I have a question regarding immunization portfolios that are continuously compounded. Suppose we have the following three bonds: Bond 1: one year zero coupon with principal of $100 Bond 2: two year ...
21
votes
5answers
15k views

Portfolio optimisation with VaR or CVaR constraints using linear programming

I would like to optimize a portfolio allocation (maximizing the exposure or the expected return), but with VaR or CVaR contraints. (some parts of my portfolio cannot exceed a certain VaR) How can I ...
1
vote
0answers
117 views

Replicating portfolio

I have a doubt about the replicating portfolio methodology. Example - Consider an European Call with $K=21$ and underlying with current price $S_0=20$. We assume that, at the maturity, the underlying ...
2
votes
1answer
88 views

Correlation sensitivity in multivariate $t$-copula for portfolio VaR of electricity futures using Kendall's tau-$b$ correlation matrix

My t-copula model captures the daily dollar returns of a portfolio of approximately 400 assets. I am curious if there's a generally accepted way to quantify the sensitivity of portfolio movements with ...
0
votes
0answers
48 views

Proof of existence of one only martingale measure

I know that: Hypothesis 1 (Girsanov Theorem) Let $\theta=\begin{Bmatrix} \theta_t \end{Bmatrix}_{t\in [0,T]}$ be a square-integrable and $\Im_t$-adapted process such that $\mathbb{E}[e^{\frac{1}{2}\...
0
votes
1answer
79 views

Strategic Asset Allocation and Multi-Asset Class Option Based Tail Risk Hedging

If a Strategic Asset Allocation is defined as an asset allocation to weather all investment environments and one which should be employed in the absence of any market views, it would appear that the ...
1
vote
2answers
162 views

Portfolio selection with no risk-free asset

Can someone explain why some papers on portfolio construction assume that there is no risk-free asset? For example, this paper: Machine Learning and Portfolio Optimization. What could be the reason(s) ...
0
votes
0answers
221 views

Portfolio Optimization via Entropy Pooling in R (Meucci)

does anybody have experience with the Entropy Pooling Approach by Meucci in R? I am currently trying to do a portfolio optimization with Stocks & Bonds, where a 101 example would be very helpful. ...
4
votes
3answers
481 views

Asset Allocation with near zero rates

With central banks pegging interest rates to near zero rates, an argument could be made that the future distribution of interest rates and bond returns are not normally distributed. How has modern ...
5
votes
4answers
531 views

How to determine what's driving the VaR?

I am given the following data: Historical (260 days) P&L vector of a portfolio. Specific P&L's for each investment in the portfolio, for the 10 days with the lowest P&L. The question ...
3
votes
5answers
2k views

Efficient frontier doesn't look good

Hi I'm trying to draw an efficient frontier. Below is what I used. returns parameter consists of 9 column returns of portfolio. I selected 10,000 portfolios and this is how my efficient frontier ...
7
votes
0answers
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 ...
0
votes
0answers
44 views

internal rate of return ((M/X)IRR ?) of a fund

I have the following data for a fund. The contributions come from the LPs (i.e., the investors invest more in the fund, or withdraw money from the fund), MV stands for market value. The timing is not ...
0
votes
1answer
40 views

Hedge Active Duration by Issue Currency or Country of Risk

For example, lets say I own a bond issued by a company in Mexico that's denominated in USD and I want to hedge my duration exposure. I obviously need to hedge duration to the US yield curve. Do I ...
0
votes
1answer
260 views

Calculate the VaR and ES for a confidence level of 99.5% [closed]

Question: The change in the value of a portfolio in three months is normally distributed with a mean of $500,000$ and a standard deviation of $3$ million. Calculate the VaR and ES for a confidence ...
1
vote
0answers
399 views

Portfolio Performance Attribution Using Carino Smoothing

I'm trying to conduct portfolio performance attribution using Carino smoothing, but it seems that the active returns do not match and I don't know why. Here is the example I use: \begin{array} {|r|r|r|...
3
votes
2answers
310 views

Stop-Loss strategies

Does anyone know some bibliography about the problems or limitations of using Stop-Loss strategies in a portfolio? Let me explain better: for example you can have a portfolio of 30 stocks from ...
0
votes
1answer
54 views

How to deal with missing stock returns?

If I want to calculate the Covariance between two stocks but there are missing days in both, how can I deal with missing data? I want to use Pairwise deletion and only use the days of which both ...
6
votes
1answer
290 views

Optimizing a portfolio whose risk is target expected shortfall

I want to maximize the return of a $n$-asset portfolio under known risk: $$\max_{\{w \in \mathbb{R}^{n}|w_{1}+...+w_{n}=1\}} \; \mathbb{E}\left[\sum_{i=1}^{n}w_{i}R_{i}\right]$$ under the constraint $$...
0
votes
0answers
48 views

Using Timeseries DB for Tracking Asset Performance over time

I am building a system that allows users to purchase digital assets, and i would like to know the asset's performance of individual users. A user may purchase an asset multiple time in a single day, ...
0
votes
2answers
104 views

What do large weights above 1 in a portfolio represent?

If I have a portfolio consisting of weights -12,11,3,-2,5,-5, I know that negative weights correspond to shorting but what do these large weights represent? I thought the weights are the proportion of ...
1
vote
1answer
125 views

How to combine different strategies in a backtest (and IRL)

I am trying to combine long and short strategies into an L/S strategy in my backtesting program. The way I have my backtester set up is it takes a signals object (...
1
vote
1answer
673 views

How to calculate a position's contribution to its portfolio's tracking error?

Say we have assets X (with weight $w_a$) and Y (with weight $w_y$) in a portfolio. X and B returns are correlated: $Cov(R_x, R_y)\neq 0$. The portfolio's tracking error is: $std(R_p - R_b) = std((w_x*(...
1
vote
0answers
33 views

Can someone explain how the evaluation and execution through to post-acquisition portfolio management?

I am looking into Private Equity. As the topic says. I'm trying to understand the process behind the evaluation and execution through to post (and pre? if there is some) acquisition portfolio ...
2
votes
0answers
47 views

Question on the details of certain parameters in Sharpe Ratio [closed]

I'm puzzled about certain parameters in calculating the annualized Sharpe Ratio using monthly return data. Average excess return: Does this mean the arithmetic average of all the monthly excess ...
3
votes
1answer
217 views

Which Maximum Diversification Approach in MATLAB is correct?

I am currently trying to find the portfolio weights of the Maximum Diversification Portfolio and found two approaches which result in different outcomes. The first one is based on this paper:https://...
0
votes
0answers
71 views

CPPI Returns for different floors

I am new to the topic of Constant Proportion Portfolio Insurance, and have implemented it in R for the first time. Now if I calculate the cumulative return of the ...
0
votes
2answers
62 views

Choice of factor model based on correlation

I have a portfolio of assets. Each assets have been discretionally (based on investment manager experience) related to economic factors like (like exchange rate inflation spread etc). Now for each ...
1
vote
1answer
156 views

How to calculate the net return of each "partner" at different times?

Let's suppose I am starting to manage some money. The money is invested in ETFs, particular de VOO. Let's suppose I have partner one with 1,000 USD, and with this, I can buy 10 shares of VOO at 100 ...
1
vote
0answers
117 views

Cumulative returns are more correlated than non-cumulative

I was just comparing two daily returns series and noted that the correlation between them is a lot higher if they are cumulated (about .95 for cumulative returns, vs .15 for non-cumulative). I feel ...
2
votes
1answer
70 views

liquidity of a portfolio of options

In the asset management industry, many reports contain liquidity metrics such as the no. of days to liquidate 95% of a position, based on a certain participation rate. If that position is a stock or a ...
10
votes
2answers
5k views

Calculate turnover for portfolio

I am trying to calculate the turnover for a portfolio strategy. First I generate some random data and assign it dates: ...
2
votes
1answer
887 views

Why use reinforcement learning for portfolio optimization with historical market data?

One of the main advantages of (deep) reinforcement learning approaches (compared to more widely known supervised deep learning approaches) is the fact that it enables us to automatically take ...
9
votes
1answer
4k views
1
vote
2answers
687 views

Fixed Income Portfolio Optimization

I'm trying to solve for a maximum sharpe ratio portfolio in the fixed income space. To do so, i use CVXPY in python. I use this Paper as reference. This is my "setup": ...
3
votes
0answers
52 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: ...
18
votes
1answer
2k views

Testing Valuation, Size and Momentum (proprietary factors) from 1988-2013: No evidence of driving cross-sectional returns

I am currently testing whether three proprietary factors - Valuation, Size and Momentum - explain cross-sectional returns. A sample of 3000 securities was tested using Fama-MacBeth two-pass ...
1
vote
1answer
260 views

How do i find the covariance between two portfolios?

I know that the formula for covariance is But this is for two securities. How do I find the covariance between two portfolios? more specifically between the global minimum variance (GMV) and the mean-...
0
votes
1answer
111 views

What’s the best Backtest Software/method? [closed]

I have a CSV which looks like this. Ticker | Buy Date | Sell date AAPL | 2018-01-03 | 2019-03-30 TSLA | 2019-03-01| 2019-04-05 What’s the best way to backtest this CSV performance given that ...
3
votes
1answer
107 views

Possible application of Polya's Urn on Portfolio's Investments?

I wanted to find some more information of this topic, but I found very little. I might be interested in optimizing a stock investment portfolio. Maybe I could use beta or some other common risk ...
0
votes
0answers
69 views

How do I calculate FX forward hedge ratio?

Suppose I have a USD holding of 1,000,000 in my portfolio and I want to convert it into EUR in a month's time. I enter into a FX forward contract of the same amount USD 1,000,000, meaning that I have ...
1
vote
0answers
99 views

How does negative performance of a portfolio constituent affect its weight?

This is an easy question, I hope. Suppose we have a swap A with a long position, which, originally, has a weight of 30%. Over time, it has a positive performance of 3%, meaning we have a multiplier ...
1
vote
2answers
131 views

portfolio optimization with uncertain returns

What is the usual method of dealing with many uncertain mean returns in portfolio optimization? For example say you have a 3 asset portfolio with assets A, B and C. All the correlations and variances ...
0
votes
1answer
68 views

Which one is the optimal risky portfolio in the efficiency frontier in the absense of a risk free asset?

I know that the tangency point between the CAL line (drawn from risk-free asset's return) and the efficiency frontier is the optimal risky portfolio. But what if there is no risk free asset? Can I ...
1
vote
0answers
74 views

Full Copula View using Meucci's Full Flexible View

I'm currently setting up an "Investment Framework" that should allow the following steps: Investment Committee (IC) has to decide on probabilities for 4 different market states. I have historical ...
4
votes
1answer
462 views

Why use square root of companies market cap in the WLS matrix

When doing a regression based performance attribution I see that people normally use WLS. So that both our independent and dependent variables are multiplied by our WLS matrix, which is a diagonal ...
0
votes
1answer
128 views

Active vol strategy within a portfolio

Suppose I'd like to have 10 % of my portfolio allocated to "long volatility" by rolling straddles . Obviously going all in on one trade implies significant risk of losing all the money. Does anyone ...
0
votes
0answers
18 views

Insured Portfolio via call + cash: how much cash?

I am unsure about the quantities to keep in the risky asset, S, and the non-risky asset, M, when constructing an insured portfolio via Call + Cash (rather than Stock + Put). My understanding so far is ...
19
votes
3answers
3k views

Hedging Covid-19 and other low probability high loss risks

Covid-19 and similar risks are low probability, high loss events. Does it make sense to utilize options to provide hedges for such events? For example, should one utilize long positions in deep out-...

1 2
3
4 5
13