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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2answers
521 views

Why is Fama French model a risk model

I get this question from interviewer about what is alpha model, what is risk model and why is Fama-French a risk model. As my understanding, alpha model forecast expected return, so the factor could ...
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1answer
57 views

Capital call VS Capital Commitment [closed]

I would like to understand the difference between capital call and capital commitment and needs to know the importance of these items in portfolio management
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1answer
65 views

Country allocation -optimization 3 countries

I have the following problem: an equity portfolio allocated to 3 countries. Each country has an independent indicator (signal) which takes values from -4 to 4. The allocation for each country at ...
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2answers
113 views

How to calculate the multi-asset class portfolio vega?

I am viewing a risk report of a hedge fund and the portfolio vega seems to be a plain summation of the vegas of the different asset classes the fund invests in (i.e. Equity, Credit etc) As far as I ...
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339 views

Portfolio Analysis Interview Question

Suppose you have a portfolio of 100 options. Then I give you a subset of trades in which you can make. The trades consist of possible buys/sells of different options from different clients. Discuss ...
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2answers
235 views

What is the strategy for this piece of information

Heavy Math background, very light finance background: Suppose I have a stock $S$ whose price is measured by the market once on times $t_0$ $t_1$ $t_2$. Now the market has some opinion for how the ...
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1answer
155 views

Examination of Betting Against Beta

http://pages.stern.nyu.edu/~lpederse/papers/BettingAgainstBeta.pdf In this article the authors explain a theory/strategy called Betting Against Beta. My background is more in Math rather than finance ...
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152 views

name of this portfolio optimization strategy

I have come across a portfolio selection strategy that buys in equal amounts the top decile of expected earners, and simultaneously short sells the lowest decile in a similar fashion. What is this ...
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1answer
138 views

Dynamic asset allocation strategies using a stochastic dynamic programming approach

I am currently reading Gerd Infanger's Chapter 5 on "Dynamic asset allocation strategies using a stochastic dynamic programming approach" in the Handbook of Asset and Liability Management edited by S....
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2answers
131 views

r: analyse series of historical positions as portfolio using 'standard' tools

I have a series of historical trading positions in the form Symbol OpenPrice OpenDate InvestmentInDollars CloseDate ReturnInDollars I need to evaluate the ...
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342 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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1answer
52 views

Risk attribution model without weights data

I was just wondering if there are risk attribution model that does not require the asset weights data. It appears that most risk attribution models do require asset weight data. I am looking for model ...
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1answer
124 views

Preference between low (zero) and negative correlation

I am trying to create an artificial score grading user's portfolio correlation. In terms of diversification, lower correlation is obviously better. However, should negative correlation get a higher ...
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52 views

Benchmarking of Portfolio weights

I have 5 stocks and a commodity in my portfolio which I have allocated based on maximum Sharpe Ratio optimization. I need to benchmark them against an Index and compare the portfolio weights. How do I ...
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65 views

Constrained Optimization for performance attribution

I am trying to perform constrained opmitization for portfolio performance attribution analysis. Specifically, I am trying to determine the impact of sectors performance on the S&P 500 index. Min ...
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0answers
574 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 ...
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0answers
351 views

How to compute the portfolio risk when weights are negative?

In QMiF (p. 239) , the variance of a portfolio is defined as: V(R) = w'Vw = w'DCDw = x'Cx Does this formula hold if the weights are negative (i.e., short)? For example, if I have a 5x5 covariance ...
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1answer
2k views

Absorption ratio by Mark Kritzman

In Principal Components as a measure of systemic risk, the author Mark Kritzman defines absorption ratio (AR) as the fraction of the total variance of a set of asset returns explained or absorbed by a ...
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246 views

Problems with Black-Litterman: negative portfolio weights, and very poor returns

I am trying to implement the Black-Litterman model using own-defined views matrix (from consensus analysts). However, I have encountered the problems of negative portfolio weights in some periods, and ...
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0answers
467 views

What to use for Tracking error minimization

What programs/packages can one use to minimize a portfolio's tracking error? What I am trying to do is see what ex post TE, portfolio returns and variance can be achieved when adding CSR constraints ...
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2answers
145 views

Calculation VaR on long term period

I'm calculating VaR numbers from historical data for a single instrument (it's plain vanilla, not a derivative) and receive such variables: I could provide necessary data, and formulas but I guess ...
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1answer
326 views

Portfolio correlation of a long-short portfolio

I have a portfolio of long/short positions in stocks. I would like to calculate the portfolio correlation. Should I somehow account for the short position while calculating the portfolio correlation? ...
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1answer
777 views

Portfolio forward return

I am working on a project which needs to find portfolio return for the next m months. To begin, let say investor hold a portfolio of $N$ stocks with weight $w_i$ invested in stock $i$, what is the ...
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0answers
64 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, ...
4
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1answer
370 views

Ledoit Wolf shrinkage with constant correlation prior with tawny and Riskporfolios

I am trying to use R to perform the shrinkage of covariance matrix towards constant correlation as defined in 'Honey, I Shrunk the Sample Covariance Matrix'. I see there are two packages where this ...
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1answer
168 views

Portfolio turnover [closed]

Really easy question, but I am having doubts. If you want annual turnover, and you have monthly weights, wouldn't you just do in excel: {=ABS(CurrentMonthsWeights-LastMonthsWeights)*12} for each ...
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3answers
172 views

Measuring alpha (Academia vs the Industry)

During academia, I learned to evaluate the performance of a portfolio by calculating alpha as the following: $\alpha_{i} = (R_{it}-R_{ft})-[\beta_i(R_{BMK_t}-R_{ft})]$ where $\alpha_i$ and $\beta_i$ ...
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109 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 ...
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1answer
95 views

Portfolio duration

What is the correct way to calculate duration of a fixed income portfolio with long and short bond positions? And how to calculate portfolio YTM with long and short positions. For long only (or short ...
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3answers
256 views

Fund size and alpha

During my research I found that fund active returns (alpha), measured by Fama and French four factor model, decreases as the fund increases in size (asset under management). What are some reasons ...
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2answers
129 views

Portfolio volatility of discontinuous portfolio

I would like to calculate an investor's average portfolio volatility as a measure of risk aversion. My problem is, that the portfolios are not continuous: the investor can have an open position for ...
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0answers
36 views

Portfolio Immunization from Yield Perspective

Let's say we have the following situation: an asset (mortgage) with fixed payments, a prepayment & oas models to run through, and calculations for duration, convexity, and price, based on them. ...
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1answer
912 views

Active Portfolio Management: What is the logic behind this equation? [closed]

In the CFA Curriculum Level II Readings (link) it is stated without further comment that: $(SR_{p})^2 = (SR_{b})^2 + IR^2 $ where, $(SR_{p})$ = Sharpe Ratio of an actively managed portfolio; $(...
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1answer
55 views

Testing the accuracy of a created Index

So long story short, I created a Oil/Energy Index from a basket of 5 stocks in the asset class. I am looking to use mean-reversion, in order to help rebalance the allocation of funds between ...
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1answer
150 views

Volatility of a leveraged CFD portfolio

I want to calculate the portfolio volatility (as a weighted average of the products) and the portfolio consists of CFD contracts with multipliers ranging from 10 to 50 depending on the underlying ...
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0answers
100 views

Beta of options based strategy

This is probably a simple/dumb question, but I am not getting it. As per GMO's recent Insight: Second, as can be inferred from Exhibit 1, put writing strategies have a low beta to the equity ...
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1answer
3k views

Semivariance calculation (downside deviation)

what is the accurate formula for semivariance? I see two versions up to now: this version which considers as N (denominator) all the numbers over/under the mean-or any other number. This is the ...
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1answer
85 views

performance attribution - security selection= wB*(Rp-RB) or wP*(Rp-RB)?

Really confused. Finding various different ways of calculating security selection alpha. I believe it matters from whose perspective one is looking at. I am a portfolio manager and I want to know ...
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1answer
875 views

Long short equity hedge fund question

I have a question related to long short equity hedge funds. 1) What are some of the metrics used to perform risk analysis of long short equity funds on fund level? Volatility (standard deviation), ...
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0answers
180 views

shrinking covariance matrix for assets coming from different asset class

From this paper: Ledoit, Olivier, and Michael Wolf. "Honey, I shrunk the sample covariance matrix." (2003). I learned a way of shrinking the covariance matrix to get more robust portfolio ...
2
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1answer
317 views

Creating a portfolio in R : good practices

I am quite new to quantfin, but wanting to learn. I've searched for the answer (google and stackex), but haven't found anything satisfactory (but I might not be asking the correct questions...) The ...
2
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1answer
100 views

Mathematical definition of a hedge?

For two given portfolios/trading strategies I want to know what criteria need to fulfilled in order to call the one portfolio a hedge to the other. In other words; what is the mathematical definition ...
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0answers
134 views

state of the art portfolio optimization techniques

In my recent exploration, I came across this paper on robust portfolio optimization that seems to work well with out of sample situations: Robust portfolio selection problems, by D. Goldfarb G....
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1answer
295 views

Portfolio risk estimation through variance covariance matrix

Is the portfolio risk calculated through variance covariance matrix an estimate of the current risk of the portfolio? Suppose I am using the weights as of today, and I have estimated the variance ...
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1answer
225 views

portfolio returns when portfolio value is negative

I am being very stupid probably but I don't understand the following. Portfolio 1st Jan valued: -$100 A month later Portfolio 1st Feb valued: -$45 I calculate the return of the portfolio as, <...
5
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1answer
344 views

Simple mean reversion strategy portfolio construction

I had a quick idea I wanted to test, but am not sure of the correct way to size bets. Basically, I think that for a given index (say S&P), I want to be long under performers and short over ...
5
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1answer
421 views

Rockafellar-Uryasev mean-CVaR optimiztion

In Rockafellar-Uryasev 2001 paper the mean-CVaR optimization can be written as a linear programming optimization problem as: $$P_{\text{CVaR}} = \arg \min_w \text{VaR}_\alpha+\frac{1}{(1-\beta)S}\...
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1answer
41 views

Portfolio return through beta [closed]

Considering the beta value of the three assets in my portfolio simulation and the weights of the assets, i have computed the beta of the portfolio itself. How can i calculate the expected return of ...
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2answers
389 views

Portfolio Optimization Constraints

Wondering which are some standard constraints in portfolio optimization in practice? For example, assuming we want to maximize expected returns subject to a risk constraint, typically we may have -...
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1answer
140 views

Return.portfolio function for re-balancing with time series of weights

I am using the Return.portfolio function from the PerformanceAnalytics R package in order to re-balance the portfolio based on different frequencies (i.e. daily, weekly monthly, etc.) using a time ...

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