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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Optimizing a currency only portfolio with negative weights
I am testing various optimization methods for a currency-only portfolio. I have a vector of expected returns for the major developed currencies vs. the USD each week (based on a proprietary model). I ...
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Determining portfolio risk return in R given historical data for individual holdings?
Currently we compute portfolio risk and return via our own C# program. Historical data is stored in a SQL database. We want to compute the risk and return parameters - given a portfolio (i.e. not ...
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How to build an electricity portfolio for an electricity production company?
I am referring to an electricity production company. Company is located in AsiaPac. The power is generated using Natural Gas fired combined-cycle power plants. Then this electricity is distributed to ...
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Does entropy pooling apply to distributions with time-varying drift?
I have a returns process that is drawn from a normal distribution with a nonlinear time-varying drift, so I was wondering if the entropy pooling method still applies or if I need an invariant ?
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Expected length and depth of drawdown
Does anyone know of any model to estimate the distribution of drawdown length and depth assuming a certain portfolio dynamics? The arcsine law seems to suggest that a portfolio can spend a large ...
user2163
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Why do low standard deviation stocks tend to have superior future returns?
I've recently stumbled on something that really surprised me. These papers (1, 2) find that past standard deviation of returns is inversely related to future returns. That is, portfolio of low ...
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Using alpha to evaluate trading strategy
I have a trading strategy that generates returns $R_{t}$. I want to test the strategy by looking at the alpha:
$R_t - R_{f,t} = \alpha + \beta (R_{m,t} - R_{f,t}) + e_t$
I compare my alpha against ...
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Calculating the right portfolio(position size for each leg) in a Long/Short Strategy
For a Long/Short Strategy, I have two stocks with different volatilities. How can I calculate the right position size for each leg?
*The pair trading is not coming from co-integration but more as a ...
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Minimum variance hedge with more than one asset
My portfolio comprises of 3 assets A,B,C that are correlated and the variance-covariance structure is known. At any given point in time, my position in Asset A say is given to me.
I need to ...
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constructing a minimum variance portfolio
Assume a US-based company has sold something to a Norwegian company. It will receive 1M Norwegian Kroner in two months, and would like to hedge this future cash flow against currency exchange risk.
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Resampled efficient frontier length of simulation
I was provided with a VBA program from my lecturer that applies the resampled efficient frontier. We have an investment horizon $T$ (6 years) and he uses a multivariate normal distribution with ...
user2921
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Michaud's Resampled Efficient Frontier - Out of Sample Simulation Testing
I will be putting ALL my account points on bounty to whoever answers this question [if your answer is crap but it's the only answer, you're getting the 165 points]. You will have to wait 2 days or so ...
user2921
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Comparing MVO with Resampled Efficient Frontier
My question: How can I compare the Resampled Frontier (REF) to the standard MVO frontier when I have been provided with $\mu$, $\Omega$, and don't have access to true future data to test real out of ...
user2921
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Does amortization of bond start accumulating on trade date or settlement date?
I am sorry if this is not appropriate here. We are building a wealth management system and I really would like to know whether amortization of bond start accumulating on trade date or settlement date ...
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Modelling VIX Futures for risk management
I would like to model VIX futures. The aim is not pricing but risk management. Thus I want to get risk measures like volatility right and be able to accurately calculate correlations when the VIX ...
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Multi asset option portfolio risk management (greeks and FX exposure)
I am running an options book containing listed options across multiple products. I trade mostly equity and index related options - with a preference for European expiration products. I trade products ...
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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 ...
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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 ...
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Risk-Parity Portfolio Optimization using Extreme Optimization in C#
I'm trying to create a risk-parity portfolio in C# using the Extreme Optimization routines.
I'm mostly trying them out to see if I like them or not before I buy them (I'm a student so money is tight)....
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Methods for distributing cash into allocation
Are there any methods/techniques that cover distributing cash into a specific percent of a portfolio asset class while gaining the best average price?
As a simple example, a portfolio starts with ...
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Calculating portfolio allocation beta with different asset classes?
I'd like to calculate portfolio allocation beta on a portfolio that has different asset classes. The portfolio may be made up of:
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How can I use Entropy-pooling of Atillio Meucci to constuct a portfolio?
I am trying to get my hands on Entropy Pooling which was introduced by Meucci in this paper.
As an example, assume I want to construct a portfolio with five stocks and I have my view on CVaR.
How ...
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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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Trading Strategies and Portfolio Constructions based on Cross Sectional Regression? [closed]
I often see trading strategies and portfolio construction that are based on cross-sectional regression. For example, I often see regressing some numbers against some factors.
I was wondering how ...
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cointegration applied to Portfolio Construction & Risk management
There are all sorts of applications of cointegration to generating alpha on mean-reverting timeseries: comparing spot vs. futures, bond spreads, identifying mean-reverting residuals, etc.
But there ...
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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 ...
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Are there any tools or useful algos for identifying corner portfolios?
Let's say I am performing mean-variance optimization subject to some weight constraints.
I'd like to identify the set of corner portfolios so that I can interpolate the entire efficient frontier. A ...
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Can I perform an asset allocation optimization if assets are perfectly uncorrelated?
(Here is a link to the original post)
I received this interesting problem from a friend today:
Assume that you are a portfolio manager with $10 million to allocate to hedge funds. The due diligence ...
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How to compute performance attribution between daily rebalanced strategies?
I have a daily rebalanced portfolio of several strategies.
After one month, I now want to attribute the performance to the different strategies. There are several ways to do it.
For instance one ...
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Why does the minimum variance portfolio provide good returns?
I've been a researching minimum variance portfolios (from this link) and find that by building MVPs adding constraints on portfolio weights and a few other tweaks to the methods outlined I get ...
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How to run an asset replication regression?
I am doing extensive research on portfolio replication and was hoping to get some help with some problems I am encountering.
I am running a regression between 2 assets that I believe replicate ...
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Why do expected return models and risk models use different factors?
This is a question responding to weekly topic challenge. I happen to see an interesting question from SYMMYS by Michael Kapler.
I always approached expected return and risk modeling as separate
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What are the limits of bond portfolio immunization against interest rate changes?
I'm currently reading through an article on bond portfolio immunization against changes in the interest rate.
I learned that the immunization can be done against instant changes in interest rate etc.,...
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What is the case for active management?
A recent personal finance question asks when to hire an investment professional? Given that many of us here are on the professional manager side of the business, how would you make the case? What ...
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What books should any quantitative portfolio manager or risk manager have as reference? [closed]
I'm interested to know what are the critical reference texts you rely on for portfolio or risk management? I mean those texts that you come back to because they are chock full of insight and know-how. ...
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How can I simulate portfolio risk (diversification) with a 'Wheel of Fortune' like investment options/returns?
Say I have 6 possible investment options with the following probability of success and the corresponding returns:
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Calculating Portfolio Skewness & Kurtosis
I need to calculate the skewness and kurtosis of 2 asset portfolio, can someone please help me with the formulas and definition of terms? Thank you.
I have been using the matrices method and I am not ...
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optimal re-balancing strategy with asynchronous alpha signal
You want to construct an optimal portfolio.
Let's say you have an alpha signal that arrives with some period (say quarterly). The alpha signal predicts arithmetic returns one-year ahead. You have ...
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What position-sizing methods are used in futures trading?
Beyond optimal / partial f and a few other older methods, there's very little information out there for futures trading.
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How to shift amongst asset classes in response to relative value views?
I am designing an asset allocation strategy/fund which invests in four asset classes (via four independent sub-funds):
Domestic equity
International equity
Domestic fixed income
Foreign currencies
...
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Should the average investor hold commodities as part of a broadly diversified portfolio?
Many mutual funds sell "asset allocation" products which include appropriately sized investments in a variety of asset classes meant for a prototypical investor. Some of these, such as PIMCO, even ...
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How do I calculate the skewness of a portfolio of assets?
I need to calculate the skewness of a portfolio consisting of 6 assets. I know that for that I would need the co-skewness matrix between the assets. Does anybody know the formula for co-skewness or ...
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How to quantify the impact of management cost on return?
Suppose funds X and Y are the same but X has 0.25% higher management cost. Suppose we are analyzing a 2 year interval. The simple models with discrete/continuous interval -assumptions are not really ...
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robust portfolio optimization re-balancing with transaction costs
The optimal re-balancing strategy takes account of factors including i) objective function, ii) current portfolio weights, iii) expected return vector containing updated views/alpha forecasts, iv) ...
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Diversification, Rebalancing and Different Means
I have found many financial authors making generalizations about the geometric mean (GM) and arithmetic mean (AM) but they are wrong in certain circumstances. Could someone explain their reasoning?
My ...
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Alternate money management strategies to Kelly?
Other than Kelly (or fractional derivatives), are there other money management strategies in wide use among quant funds? Certainly Kelly is mathematically optimal, but perhaps there are other ...
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What type of investor is willing to be short gamma?
As far as I understand, most investors are willing to buy options (puts and calls) in order to limit their exposure to the market in case it moves against them. This is due to the fact that they are ...
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penalizing negative skewness by linking $U(\mu)$ and $U(\Sigma)$
Consider $U_1(\mu,\Sigma)$ and $U_2(\mu,\Sigma)$, where $U_1(\mu, \cdot) = U_2(\mu, \cdot)$, $U_1(\cdot, \Sigma) = U_2(\cdot, \Sigma)$ such that
\begin{equation*}
arg\inf\limits_{\mu \in U_1(\mu, \...
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Role of skewness in portfolio optimization?
What is the role of skewness in portfolio optimization?
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Quant PMs need to know the following... [closed]
To the degree in which it's possible, I'd like to know what the community believes are the objective skills/knowledge required to run a successful Quant book.
I'm not interested in strategies, ...
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