Questions tagged [portfolio]

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14
votes
3answers
15k views

Is there a step-by-step guide for calculating portfolio VaR using monte carlo simulations

I am trying to determine a step-by-step algorithm for calculating a portfolio's VaR using monte carlo simulations. It seems to me that the literature for this is extraordinarily opaque for something ...
7
votes
2answers
1k views

Average correlation of index/portfolio

We try to analyze the average correlation of a portfolio as it can be found here in section 2 b), the same formula which is also used by the CBOE to calculate implied correlations: $$ \rho_{av(2)} = ...
16
votes
3answers
5k views

How do I find the most diversified portfolio, or least correlated subset, of stocks?

I have a trading system that chooses top 10 stocks in Nasdaq 100 ranked on relative strength and some other factors. However, I'd like to take positions in only 5 of these 10 stocks based on how ...
15
votes
2answers
4k views

Modelling with negative interest rates

For a project, I am interested to model the impact of recently negative interest bonds on the portfolio. The literature on modelling negative interest rates is limited, and the only theory I could ...
28
votes
12answers
17k views

What is the reference python library for portfolio optimization?

Does anyone know of a python library/source that is able to calculate the traditional mean-variance portfolio? To press my luck, any resources where the library/source also contains functions such as ...
12
votes
4answers
2k views

Are these steps correct to calculate Value-at-Risk with a Monte Carlo simulation?

I have a problem calculating VaR with the Monte Carlo Simulation. I followed the next steps and would like know if it is a right way to calculate VaR or if I need something more? The steps Generate ...
15
votes
2answers
3k views

Risk Budgets with Target Portfolio Volatility

I'm working through the implementation of a risk budgeting approach as described in the recent Roncalli paper. The idea is that the portfolio manager sets a contribution of total portfolio volatility ...
17
votes
5answers
2k views

is beta of a portfolio always meaningful?

Consider the following strategies: a stat arb strategy with no overnight exposure, but significant market exposure intraday. a market timing model which is always long or short the market. etc is it ...
4
votes
1answer
3k views

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 ...
0
votes
2answers
3k views

how to calculate daily risk free rate using 13 week treasury bill

I want to calculate excess return for AAPL plus the S&P 500. I have computed monthly and daily logarithmic returns for every stock and for the market, I now need to calculate the risk free ...
6
votes
0answers
748 views

Shrinkage Estimator for Newey-West Covariance Matrix

I like to apply the Newey-West covariance estimator for portfolio optmization which is given by $$ \Sigma = \Sigma(0) + \frac12 \left (\Sigma(1) + \Sigma(1)^T \right), $$ where $\Sigma(i)$ is the lag ...
4
votes
1answer
861 views

Portfolio optimization with Portfolio CVaR Constraint

I wanted to optimize a portfolio based on a portfolio-wide CVaR constraint (i.e. $CVaR_p \leq 0.08$). Unfortunately, I only find solution that minimizes the entire CVaR of the Portfolio. Do you mind ...
2
votes
1answer
192 views

How to deal with missing returns when creating value (equal) weighted returns

recently I am doing cross sectional regressions, and getting confused about missing returns. Suppose we have 100 stocks, then we want to construct a value weighted return (or equal weighted return). ...
1
vote
1answer
133 views

Risk minimization by investing in all assets with positive expected return

Suppose I have an amount $T$ to invest and $N$ available assets. The stochastic return per invested unit of asset $i$ is $R_i$. The variance and the expectation of $R_i$ are $\sigma^2_i$ and $\...
1
vote
1answer
2k views

Given a correlation martrix, calculate portfolio's correlation with its assets

Find correlation vector like $[ d e f ]$ where d, e and f represent correlation of P(portfolio) with its assets A, B and C respectively. The assets A, B, C can be another portfolio. In order for that,...
0
votes
2answers
104 views

% 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 ...
3
votes
1answer
197 views

Why are there two expressions for the Black-Scholes hedging portfolio

I am new to derivatives pricing and am trying to understand why there are two different expressions for the Black-Scholes hedging portfolio. The first approach, used in books like Hull, stipulates ...
2
votes
3answers
240 views

Greeks of self-financing portfolio

I would like to learn more about the Greeks of portfolios of options: In textbooks and websites, I commonly encounter the unqualified claim that "The Greek measure of a portfolio is the sum of the ...
0
votes
1answer
430 views

How to calculate the annual contribution of a fund to a portfolio of funds?

let's assume I have a portfolio of two funds (call them F1 and F2), where, by convention, there is a monthly compounding of the returns. On a monthly basis, the contribution of each fund will just be ...