Questions tagged [portfolio]
A portfolio is a collection of financial instruments. We often collect instruments together to represent the complete holdings of an investor and to analyze the overall risk (which may be lower due to diversification, i.e the portfolio holding multiple instruments).
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Why no median-CVaR optimization for portfolios?
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Since CVaR is a concept that can be applied to all probability distribution, even if they do not follow normal distribution, I thought CVaR should be more concerned with median, not the ...
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Constructing Portfolio Beta
Suppose I have a portfolio with securities with different history. Say some securities have 15-20 years of history and some are like Uber or Lyft, which has limited history. There are assets with 1/2/...
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Leverage constraints
I am trying to complete my project on Mean-Variance Leverage Optimization, and I have found lots of helpful advice on this forum.
I wanted to ask you if you have some idea on how to implement a ...
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Calculate return for a set of securities downloaded using quantmod
I downloaded adjusted closing price using quantmod for a set of securities. I want to calculate daily/weekly/monthly return for all securities. Usual dailyReturn, weeklyReturn etc not working. What do ...
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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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Portfolio volatility - Real life application
Given that a portfolio consists of Stock=USD 30, High-yield bonds(duration=5 years,spread duration=5 years) =USD 40 , Commodity = USD 30.
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Vega for long long-term ATM call and short short-term ATM call
You are long a long-term ATM call and short a short-term ATM call. The
ratio is adjusted to make the total vega zero. If before expiry of the
short-term option, spot is again at the strike price. ...
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Applying portfolio variance weight based on logarithmic returns?
The expected logarithmic return of a portfolio is calculated as :
$$𝐸_p = \log\left(\sum_i w_i e^{R_i}\right)$$
Therefore, I was wondering that how can I apply weight to use with the variance based ...
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Classifying groups of stocks beyond Market Cap/Industry/Sector
I'm monitoring margin values for a portfolio and I want to classify the stocks in my universe using different metrics/information. Just for the sake of making analysis/inferences on the data I have.
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Which performance evaluation measure to assess "Connectedness Matrix" based porfolios?
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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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portfolio information ratio calculation on daily returns including hedged strategy results interpretation
I am tasked with calculating the portfolio information ratio on ~15 years of daily portfolio returns and I am finding several approaches online which is quite confusing.
The first approach simply ...
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Arbitrage when risk-free portfolio earns less than riskless portfolio
I'm currently reading Paul Wilmott's excellent book on option pricing.
Near the beginning, he constructs a risk-free portfolio using an option, and a short on the underlying to hedge the risk. I'm ...
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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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Another variation of the 'Sharpe ratio' in CVaR-based portfolio optimization?
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What is the ratio S(p) shown below? Do we have a name for it like 'Sharpe ratio'?
The ratio above is introduced in the academic paper Optimal portfolio selection in a Value-at-Risk framework
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Portfolio Delta - long call, long put and short call
First and foremost, I'm trying to understand why you would construct a portfolio made up of long calls, long puts and short calls. I find this really abstract and confusing. I've tried drawing the pay-...
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Co-variance of Portfolio A with Portfolio B
I'm trying to calculate the correlation between two separate portfolios.
I've used A*COV(AB)*B to calculate the co-variance of each portfolio where:
A = Array ...
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Holding Period Return abnormally high
I've been doing my Dissertation and I was told to create a value - weighted portfolio on the 1979's 200 largest cap corporations (based on Market Value). I was also told that the correct way to build ...
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When does funding cost of a portfolio enter into the portfolio's present value?
This question comes from some confusion when reading Hull's book and from the general concept of no-arbitrage/self-financing portfolios in stochastic finance books. I am not fully seeing the ...
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Equal Weight better sharpe than Tangency portfolio
Could you explain to me what it means to have better Sharpe Ratio in Equal Weight portfolio than tangency portfolio (max sharpe).
Thank you.
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Fama Macbeth regression and portfolio sort result contradiction
I ran Fama Macbeth (regression) on two variables called return and lag MAX ( monthly average return and lag of maximum return over a month). the results are like the following :
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How are modern portfolio theory (MPT) and CAPM related?
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In what sense Capital Asset Pricing Model(CAPM) is related with Modern Portfolio Theory(MPT)?
Why do we need to check whether the current price of assets is overvalued or undervalued ...
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Resource to learn about Long / Short Commodities portfolio
As title says, I'm looking to learn more about Commodities trading and how to report and monitor a Long short Portfolio.
Can anyone point me to a good book / website where I can improve my knowledge?
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Portfolio Weight Sum and Negative Weights
I'm calculating the weights of 10 securities in a portfolio for a course project, with the objective of maximizing the sharpe ratio. I'm getting both positive and negative results for weights. The ...
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Differences Between Portfolio Daily Average Returns
I have a doubt about the average daily return for a 2 stock porfolio. I have the data of both stock returns over a 1511 day period. I used 2 approachs to calculate the average return.
In the first one,...
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How to construct a risk parity Portfolio by fixing the portfolio volatility on a desired level?
I would like to get the weights of a risk parity portfolio (equal risk contribution). Therefore I use following formulas:
$\sigma(w)=\sqrt{w' \Sigma w}$
$\sigma_i(w)= w_i \times \partial_{w_i} \...
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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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What does risk tolerance represent for utility-maximizing optimization with linear constraints?
Referencing Wei Jiao (2003) p. 8, formula (1.12), for $Ax = b$ set of linear constraints in a portfolio, the solution for the optimum weights to maximize the utility is:
$$w^* = \Sigma^{-1}A^T \left( ...
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How to calculate "portfolio cumulative return" from individual price data and weight of them?
I'm trying to run backtest in a vectorized way using Python Pandas and need to calculate a portfolio cumulative return from price data and weight of asset data.
I ...
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Replicating portfolios [closed]
Prices of a stock are modeled using a two-period binomial tree, with each period being six months.
The continuously compounded risk free interest rate is 7 %
The stock pays 2 % continuous dividend.
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beginner portfolio statistics - annualized volatility of multi-asset portfolio
Sorry for the dumb question, but I wanted to make sure my understanding of what I read and compiled was correct! I am trying to calculate the variance-covariance matrix, and annualized volatility of a ...
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How to calculate the normalized value of a changing stock portfolio?
My goal is to compare a portfolio of stocks with a benchmark over time. Calculating the normalized value of a static portfolio is no problem, but I am struggling when stocks are removed or added to ...
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VaR for Options portfolio
I'm asked to estimate VaR for Options portfolio. Firstly, I wanna try to estimate VaR for AAPL stock european call option using Historical Simulation but I can't find any Historical Data. I tried ...
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Return Contribution for Annual Returns
I have a portfolio $p$ made up of a bunch of assets $i$ where the weights change slowly over time. The returns over each period $j$ composed of the weighted returns of the asset $r^j_p$
$$
r^j_p =...
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Calculating the long run average default rate when the portfolio changes during the year
The Basel rules prescribe to calculate a long run average default rate (LADR). It is stated that his rate should be calculated as the average of yearly default rates.
A first idea what be:
look at ...
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Software or apps for portfolio analysis and backtesting
I actually finished an algorithm that i can use to extract all the trades for each stock (each file for each stock). Essentially, i run this code on Excel where there are the input about one stock, ...
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Questions related to Sharpe's return-based style analysis
I have been reading about Sharpe's return-based style analysis, which tries to determine the manager's exposure/effective asset mix to changes in the values of the asset classes. It does so by using ...
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Negative variance?
Using the formula w*Cov*t(w) I can generate a negative portfolio variance. What are the implications of a negative variance? Should I just assume it's zero? A negative variance is troublesome ...
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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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Correlation of assets to portfolio of assets
How do you calculate the correlation of an asset to a portfolio, when for all assets in the portfolio you know there: correlation to each other, volatility and weight in portfolio.
For example: ...
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Explaining an Option product: SIX Discount Certificates
So I have the option with the important info above.
I am trying to generate a portfolio that represents the option.
However I am stuck on the first hurdle as I believe it is a call option as the ...
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R PortfolioAnalytics
I am not able to find PortfolioAnalytics package for windows from CRAN. New to R, will greatly appreciate any help how to find and install this package.
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Why Do Universal Portfolios Work?
I've been reading up on universal portfolios, but I haven't been able to find an intuitive explanation as to why they have the theoretical guarantees that they do, especially that they track the best ...
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What is the return of risky asset in direct utility optimization probem?
I am trying to do this portfolio optimization for a one-month investment between S&P 500 as a risky asset and one risk-free asset:
Assume that I have a power utility function, a risk-free rate ...
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Portfolio Optmization With Risk Aversion Parameter R
I have this problem in R.
$$\max w^Tu- y w^T A w$$
where A is covariance variance matrix, y risk aversion parameter.
Is it rigth if I use the function solve.QP multiplying the covariance matrix for ...
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How to ascertain/establish certainty of a portfolio rebalancing strategy?
I created a portfolio rebalancing strategy, that I am currently paper trading with. It is, primarily, based on mean-reversion principle with a few rules in place, and geared towards cryptocurrencies, ...
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% Drawdown on Stock Portfolio to hit Margin Call
Margin requirement is industry standard at 30% of total portfolio (cash + margin loan)
e.g. You have 600k in equities purchased with cash and 400k in equities purchased on margin loan. The total ...
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Creating riskless portfolio in black scholes
$$\begin{align}
d\pi &= \theta dV + dS
\\[3pt]
& = (\theta \partial V/\partial t + \theta \mu S \partial V/\partial S + \theta S^2 \sigma^2 \partial^2 V/2\partial S^2 +\mu S ) dt + (\theta \...
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What returns to use?
I have monthly returns of my portfolio... I would like to summarize the performance over a longer period in one overall figure.
Should I use log returns per month then use geometric mean on the log ...
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What is `1+ return` called? [closed]
Assuming day 1 my wealth is 1. At day 2 I earned 20%. So the rate of return is 0.2 and the wealth at day 2 is 1.2. At day 3 I earned 50 % again. So the wealth at day 3 is 1.8. I wonder what is the ...
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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 ...
