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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Time and asset weighted rate of return of a portfolio
If I have a portfolio with 3 initial assets on day 1 (say, stock 1 with beginning market value of \$100, stock 2 \$150 and stock 3 \$175) and after 10 days the stock 2 is sold for \$200, how can I ...
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Black litterman's formula
Hi just curious where can I find the proofs of Black litterman's first term and second term formula? I don't quite know how exactly they derive the entire formula using inverses of matrix.
Thanks!
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Portfolio construction with volume based bars
In the book Efficiently Inefficient, Lasse Pedersen interviews Myron Scholes:
LHP: Why do spreads tend to widen during some periods of stress?
MS: Well, capital becomes more scarce, both physical ...
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Mean Semivariance Optimization VS PMPT
Mean Semivariance optimization defines semivariance, variance only below the benchmark/required rate of return, as:
$(1/T).\sum_{t=1}^{T} [Min(R_{it}-B,0)]^2$
where $B$ is the benchmark rate, $R_{i}$...
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Machine learning for portfolio optimization
What algorithms from machine learning, supervised learning or unsupervised learning have been recently used for asset allocation models as alternatives to the Markowitz mean-variance optimization ...
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Annualizing Sharpe Ratio using small time frames
I have coded a strategy that works 5m time frame. I know you multiply it by 252 but i am using 5m or sometimes 1h time frame. Which number do i have to chose to multiply? There are 72576 five minutes ...
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Why does the price of a butterfly spread increase are rate exponential [closed]
I know that stock prices are assumed to be Stochastic processes that follow Geometric brownian motion. The expectation of stock prices at time T given stock price at time 0 is: $e^{-rT}S_0$. However, ...
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Walk Forward Analysis Using Portfolio Analytics R
I am learning how to use the Portfolio Analytics package in R and I am concerned with overfitting the data for the optimization.
The optimize.portfolio.rebalancing() function has 2 parameters that ...
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What is the most recent measure of the US Municipal Bond Market Size (Capitalization)?
$3.853 trillion in second quarter of 2018 according to Fed. Today?
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Risk neutral valuation [closed]
In a world with three possible states (1, 2, 3) and three assets (A, B, C), the payoff matrix looks like this:
$r_A;_1,_2,_3 = 110, 110, 110$ $p_A = 100$
$r_B;_1,_2,_3 = 100, 50, 40$ $p_B = 70$
$...
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Non-redundant asset?
I've been solving many exercises with three assets that have two possible payoffs each, one payoff per possible future state. The question is always the same, i.e. is any asset redundant.
After ...
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No risk free security?
Imagine market without a risk free security. How is security market line constructed? How is it interpreted?
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Problems with Performance Attribution Analysis
I am using the typical Brinson Model formula, but it doesn´t work, I think that is explained because of the compound effect and rebalancing...
when I look my portfolio's YTD return and multiply by the ...
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Absorption Ratio
I'm actually trying to implement Mark Kritzman's absorption ratio (Principal Components as a Measure of Systemic Risk by Kritzmam, Li, Page and Rigobon, 2010, SSRN 1633027) using Python, but I'm not ...
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Given multiple strategies with their ER, volatility, how would I calculate the combined Sharpe?
Without knowing the actual daily returns, I have a table something like this:
...
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Why can't I take the Value at Risk "VaR" as a a risk objective in PerformanceAnalytics? (it does work for "ES)
I am currently playing around with PortfolioAnalytics package in R and some data and I am aiming to create different portfolios with different VaR. However, I am struggling first of all, add.objective(...
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Can we get the portfolio size approximation from the PnL? [closed]
Im wondering if we can get the portfolio size approximation, if we have the volatility and -/+ pnl of the portfolio ? Is there a method or a formula ? Example the annual volatility of 3% and daily ...
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Spot trading: exact mathematical definition of the positions for a portfolio
Let us say that I want to spot trade a portfolio constituted of a pair of two stocks of respective prices (for example in USD)
$S^1_t$ and $S^2_t$, and suppose for example that they co-integrate ...
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Rebalancing order on trading pairs
I'm working on a program to rebalance my portfolio among a set of crypto assets. Though I'm a bit confused on how to best order the buys in sells among the various pairs.
Consider the following ...
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Correct beta weighted delta options formula?
Is this the correct formula for beta weighted delta: http://www.nishatrades.com/blog/beta-weighted-delta
I've seen this What is the formula for beta weighted delta and gamma? but they seem to be ...
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Some definitions in the BARRA Predicted Beta model
I'm studying the BARRA Predicted Beta model, and the common factor covariance between portfolio $p$ and the return on the market $m$ is defined as the product of the transposed vector of the factor ...
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Markowitz models with uncertain returns
I am analyzing the Markowitz models with uncertain returns as follows: after calculating the expected returns and the covariances of 30 monthly historical series of 30 stocks, I resolve the Markowitz ...
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How to reasonably aggregate returns across both different assets and different time-horizons?
This might be a somewhat open question, so any suggestion of improvement is welcome.
Suppose at time $t=0$, we have $N$ different assets whose weights are $w_1,\cdots,w_n$ ($\sum w_i = 1$), and they ...
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Mean-cVaR model: How can one include transaction cost
$$
\min \delta CVaR - (1-\delta) \sum_i^{n} \mu_i x_i \\
\sum x_i = \sum x^{old}_i \\
Losses(s) = \sum x_i - \sum_i^{n} (R(s,i))x_i \\
VaRDev(s) = Losses(s) - VaR \\
CVaR = VaR + \frac{\sum_s^{} ...
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Is the Market Portfolio on the Markowitz Efficient Frontier?
I have seen "market portfolio" defined online (Wikipedia/Investopedia) as the bundle of all available investments where the assets are each weighted in proportion to their existence in the market. I ...
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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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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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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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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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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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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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Volatility of stocks
I want to build a theoretical Portfolio with markowitz optimization for a course in University. The task is to build a Portfolio with low risk. So i want to do a CPPI strategy. Now the stock part of ...
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P2P lending and correlation with other major asset classes
I am looking for a credible study (i.e. a good/reputable source) into the correlation of returns on assets in Market Place Lending / Online Direct Lending / Alternative Finance with other major asset ...
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How to hedge a MV portfolio against crises
I have constructed an adjusted Mean-Variance portfolio optimization method that optimizes the exposure in a set of X assets.
The portfolio works perfectly fine during normal periods (even when there ...
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How to find the ideal options trade given certain return distribution?
Suppose I have a probability distribution for the return of a given stock from now until some expiration date. Is there any algorithm/process/software that will take that probability distribution and ...
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Comparing two portfolio construction strategies
Suppose that I have two long-only portfolio construction strategies and that I backtest both of them on the same data. If I wanted to find out whether one of these methods would have outperformed the ...
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Expected shortfall of stable distribution by Stoyanov
I've been working on calculating parametric ES assuming the returns follow Paretian stable law. Given the four parameters - $\alpha, \beta,\sigma,\mu$- Stoyanov introduces closed form solution of the ...
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How to understand quadratic finance or practice of Value-at -Risk(VaR)
We define the following notions for a jointly normally distributed random vector $P=(P_1,...,P_n)$ with f the density function.
$$\mu=\int_{-\infty}^{\infty}(x_i-\mu_i)f_i(x_i)dx_i$$
$$\sigma^2_{ij}=...
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Architecture and Infrastructure for Robo-Advisor [closed]
Does anybody have any knowledge of Architecture and/or Infrastructure needed for building your own Robo Advisor. I am looking for directions to get in-depth knowledge for building your own Robo ...
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Fund Separation Theorem for Performance Seeking Portfolio
Can someone explain this statement?
"The beauty of the fund separation theorem is that the performance seeking portfolio mandate is the same for all investors"
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calculating long short portfolios currency exposure
I have calculated the currency exposures of a long short portfolio simply by summing the weights of each stock.
However I was told that I need to incorporate the dollar borrowing (short dollars), I ...
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How to Rank assets in Portfolio? [closed]
I am working on active equity Portfolio. I have total 30 securities in my Portfolio. Can someone please guide me how can I rank those assets in my portfolio.
...
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Asset allocation and GARCH models
I am trying to solve an asset allocation problem and I am having some troubles grasping the concept. I am working with excess returns on 4 stock indices and I am obtaining the excess returns forecasts ...
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Determining the investment strategy
I have the following problem:
Consider the 5 year investment strategy and given the yearly portfolio returns $S_{t+1}/S_t$ and dividends $D_{t+1}$ paid at $t+1$ which are modeled as:
$\frac{S_{t+1}}{...
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Can anyone suggest book about fixed-income portfolio management? [closed]
Can anyone suggest books about fixed-income portfolio management?
Thx
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Disaggregating stock performance and dividend yield
I modeled the performance of several portfolios with adjusted close data and would now like to understand how much of it is driven by changes in stock price and dividend payouts.
I have all the data ...
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Investing in all assets with positive expected return and allowing for positive correlation
How does the answer to this question Risk minimization by investing in all assets with positive expected return change if assets can be positively correlated (but not perfectly) and short sales are ...
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Multi-objective optimization: Where to find qualified examples for portfolio management?
I am looking for qualified examples of multi-objective optimization applied to a portfolio management situation in non-normal markets. Where can I find one or more examples of such a multi-objective ...
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In theory historical performance of a portfolio
I am looking at the quantitative model our team is using for analyzing the performance of a portfolio of stocks. However I don't understand what the model is trying to achieve.
The model is supposed ...
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Model-independent dynamic portfolio optimization techniques
For a problem where we need to optimize the portfolio based on the data, going for Markowitz MPT has the following advantage: we only have to estimate mean and covariance to find optimal weights. I'd ...