Questions tagged [portfolio]

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42 views

Finding a PDE for an option $V(t,r(t),S(t))$

I have 2 approaches in my mind for finding a pde of an option that depends both on the short rate as well as the stock price- $V(t,r(t),S(t)$. Are these equivalent? Find a hedging portfolio by ...
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Is there a clear mathematical statement of what problem Hierarchical Risk Parity is solving?

Prado's paper is really just an algorithm for solving some inverse problem. Has anyone seen a clear statement of that inverse problem? Or do you know how to write it simply? The first step is just a ...
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1answer
16 views

annualised returns and volatility for 3 month data

I have a portofolio with 30 indexes and I want to calculate the annulised returns and volatility because I want to compare it with another portofolio with different number of indexes (but same time ...
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1answer
48 views

Global portfolio alpha

How does one compute the alpha of a global portfolio. Let's say we are using the Fama French 3 factor model and we have a portfolio of 50% US stocks and 50% German stocks. Should the regression be ...
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20 views

Efficient portfolio standard deviation

Is annualized/ or average monthly standard deviation applied on the x-axis of efficient portfolio graph? Assuming expected annualized portfolio return is applied on the y-axis. thanks for your help!
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1answer
41 views

How to build a portfolio following the Smart beta process by dividend? [closed]

I'm having trouble finding the method to track smart beta dividend management. I have an Excel file which contains the prices and the dividends of certain companies, and I want to build a portfolio ...
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18 views

Assessing transaction costs of different portfolio strategies

I am trying to evaluate different dynamic allocation strategies based on the same stocks' universe according to their transaction costs. I was thinking to simply compute it as some sort of turnover ...
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1answer
71 views

What’s the best Backtest Software/method? [closed]

I have a CSV which looks like this. Ticker | Buy Date | Sell date AAPL | 2018-01-03 | 2019-03-30 TSLA | 2019-03-01| 2019-04-05 What’s the best way to backtest this CSV performance given that ...
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88 views

How does negative performance of a portfolio constituent affect its weight?

This is an easy question, I hope. Suppose we have a swap A with a long position, which, originally, has a weight of 30%. Over time, it has a positive performance of 3%, meaning we have a multiplier ...
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24 views

Univariate Portfolio Analysis

We want to form 10 portfolios based on the level of VAR (99%) for equity data over a 30 year period. Portfolio 1 is the portfolio of stocks with the lowest value-at-risk and Portfolio 10 is the ...
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36 views

Option pricing PDE Black Scholes one-factor Hull-White (or Vasicek) model

I am trying to find the option pricing PDE of the Black Scholes one-factor Hull-White (or Vasicek) model using a self-financing portfolio strategy. The system is as following \begin{equation*} \begin{...
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1answer
24 views

Equity risk factors with daily rebalancing

I am building some well known equity factors on the S&P for research purposes. It means those are going to be used for general evaluation purposes but do not need to be replicable. Would it be a ...
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26 views

Variance of the risk systematic component in Fama and French Three Factor Model

in my assignment i have to compute the variance of the risk systematic component in the Fama and French Three Factor Model. Does anyone know the formula or how to compute it? Thank you
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1answer
24 views

Beta of sum or sum of betas

When interested in the beta of a portfolio, I see people make a weighted sum of the portfolio components' betas. Intuitively, I would have calculated the beta of the portfolio based on its aggregate ...
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0answers
63 views

CVaR portfolio optimization with risk aversion parameter

I'm trying to implement the Rockafellar's function described in this paper http://past.rinfinance.com/agenda/2009/yollin_slides.pdf with a risk aversion parameter for my thesis. The function to ...
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1answer
42 views

Why does Merton's fraction give unintuitive quantities using real world data?

The solution to Merton's portfolio problem suggests that an investor invest $\frac{\mu - r}{\sigma^2 \gamma}$ percent of their wealth in the stock market, where $\mu$ is the rate of return of the ...
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28 views

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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1answer
72 views

R - Portfolio construction based on own calculations, with rebalancing of components

I have used random forest in R to get probabilities for stocks being in a certain class. With those probabilities i would like to construct portfolios containing the 5 stocks with the highest ...
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2answers
83 views

Understanding what is 'special' about the security market line

I am trying to get my head around the CAPM model and all the intricacies of portfolio management. I have written some code to help me visualise what happens to the risk-return characteristics of my ...
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1answer
77 views

Is it possible to construct a hedge that matches value Delta Gamma and Vega?

Given a strike price, current price, risk free rate, dividend yield and volatility, I have been asked to calculate: - a hedge which matches the value Delta and Gamma - a hedge which matches the value ...
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38 views

Variance/VaR calculation for a Portfolio

I'm considering a portfolio of multiple stocks (>2), and calculating their Standard Deviation/Variance and VaR for the portfolio. My question is about the below two ways to calculating them Consider ...
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0answers
44 views

How to Calculate Discrete Currency Returns for Short Positions

I need to calculate currency returns for 1) short selling the currency and 2) going long in the currency. When going long, the currency is sold at Forward price $F_t$ and bought at spot price $S_{t+1}$...
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48 views

What does “invest in portfolio volatility” mean?

In this paper, Barnea, Amir, Henrik Cronqvist, and Stephan Siegel. "Nature or nurture: What determines investor behavior?." Journal of Financial Economics 98.3 (2010): 583-604. it is mentioned ...
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2answers
62 views

How to compute a portfolio value?

I am learning fundamentals of option market and ran into an example I do not understand : Let's assume I have a portfolio of 3 shares priced \$22, and a European call option to buy a share for \$21 ...
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1answer
66 views

portfolio volatility over time

When estimating portfolio vol. with: $\sigma = \sqrt{w^T \cdot cov \cdot w}$ How does the sample length of returns affect $\sigma$? Is it possible to exponentially weight something to give more ...
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1answer
152 views

Value at Risk for portfolio with different maturities

I am new to StackExchange and relatively new to quantitative finance. I work at a commodity trading company and we have an extensive portfolio of futures and options on commodities (traded on the CME, ...
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0answers
54 views

Visualise returns of n-asset portfolio as 2D plot, like heatmap?

It's possible to visualise both asset allocations and returns of 2-assets portfolio as 2D heatmap. Like in image below, the visualisation of $[Gold, Silver]$ portfolio with restriction $Gold + ...
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1answer
66 views

What if all the weights are negative in mean-variance optimization during a crisis?

Usually the constraint is that all weights sum up to 1. But in a crisis when all assets are falling in prices, intuitively, all the weights should be negative in the optimization. But it contradicts ...
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65 views

Is optimising for the Final Wealth is the same as optimising log of growth rate in Kelly Criterion?

A direct, brute force approach could be used to find the Optimal Portfolio. Consider simple play. There's a biased coin with 55% probability of win. The simulator play as a single person with 100$ ...
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50 views

What is the appropriate breakpoints for portfolio sorting (using CRSP stocks) based on size?

I want to sort stocks based on size. I use CRSP database from 1962 to 2018. My question is that in order to create quintiles, what is the appropriate breakpoints? and how can I calculate them? I saw ...
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1answer
99 views

Constructing an arbitrage opportunity for a company involving Forwards

Let's say an investor enters a long forward contract on 100 units of underlying assets $S$ and maturity $T$ = 4 years. The asset $S$ pays no dividends and the spot price of one asset is $S_0$ = £5. ...
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1answer
120 views

Calculating Delta of option portfolio using average of inputs

Trying to think through two options portfolio scenarios, which are highly similar. I'm wondering if you can take a portfolio of options, all written against the same underlying product, and use ...
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1answer
112 views

Duration of portfolio equals to zero

I am solving the following problem: Consider a 2000 dollars bond with maturity of 5 years and a half-year coupon of 25 dollars at a nominal interest rate of 8% p.a and a consolidation bond (...
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1answer
91 views

Correlation of a portfolio of trading strategies to a benchmark [closed]

I have two trading strategies, both having a correlation of 0.5 to an indicator 'i'. If I take a portfolio of these two strategies, what will be the correlation of this portfolio with the indicator 'i'...
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1answer
45 views

Surface plots of the mean-variance efficient frontier

3d surface plots contain an X, Y and Z axis. For the mean-variance efficient frontier: X axis is portfolio volatility ($\sigma_p$) Y axis is portfolio expected return ($\mu_p$) any ideas for what ...
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42 views

Tracking a portfolio's annualized return

Sorry for this dumb amateur question, but looking for some help. I’ve created an Excel line chart that tracks a portfolio’s annualized rate of return. For example, a year ago the portfolio had an ...
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1answer
261 views

Value-weighted return: which date should the market-capitalization be based on?

I got a short question regarding calculating the value-weighted return of portfolios. Example: The portfolio is constructed based on the value of a certain criteria on date 31.1 (Jan 31st). The ...
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3answers
122 views

Why is Portfolio Theory not using the distribution of portfolio returns

Portfolio Theory uses things like Expected Value, Risk, Confidence. I wonder why it's not ...
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1answer
94 views

Adjusting volatility while constructing portfolio

I am trying to construct a portfolio based on a macro momentum strategy for backtesting purposes as outlined in https://www.aqr.com/-/media/AQR/Documents/Insights/White-Papers/A-Half-Century-of-Macro-...
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1answer
111 views

Value-weighted Portfolio Confusion

just a very short question regarding value-weighted portfolios. As the results are not as expected I try to cancel out any possible wrong assumptions. I created five portfolios à 100 companies out of ...
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0answers
25 views

Show the expected return of the portfolio and how to derive return variance of the long-short portfolio?

Show the expected return of the portfolio and how to derive the return variance of the long-short portfolio? (see picture)
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1answer
134 views
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1answer
100 views

Is there a quicker algorithm for calculating 'drifted' portfolio weights? (R, Pandas/NumPy, MATLAB)

'Sup, QuantSX. BLOT (Bottom Line On Top): Is there a nice clean algorithm for rapidly calculating portfolio weight drift? In R, Python or MATLAB - I'm not fussed which. Details I'm in the final ...
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1answer
82 views

Some interpretation on some plots / statistics

I have been playing with a model just for learning purposes (I don't expect to make any money from the model) but I wanted to get some opinions on what you think are "good" values and some opinions on ...
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1answer
113 views

Sharpe Ratio and Sortino Question: Standard practice

For Sharpe ratio calculation, I have seen several variations for the denominator; either the standard deviation of portfolio returns or standard deviation of excess returns. Is there an accepted ...
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0answers
42 views

How long a time horizon should be for verifying the effectiveness of an investment strategy?

Question To verify the effectiveness of a certain asset allocation strategy, how long a time horizon should be? Is there any academic paper regarding this topic? Question in more detial I know ...
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0answers
36 views

PortfolioAnalytics: Training window based on entire history before rebalancing in 'optimize.portfolio.rebalancing'?

I am fairly new to PortfolioAnalytics and R in general. I am trying to do some backtesting of a minimum variance portfolio. I have weekly, monthly, quarterly and yearly return data of 3 selected ...
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0answers
115 views

How to calculate Turnover Ratio of a scaled Portfolio

I want to calculate the Turnover of my scaled Momentumportfolio (Barroso und Santa-Clara 2015) They described Turnover Ratio with the following formula: While i understand the general concept (...
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2answers
228 views

Why annualizing sampled covariance matrix changes stock weight vector?

Question While optimizing a portfolio using 'Global Minimum Variance' (GMV) method, I found that annualizing a sampled covariance matrix makes a difference in stock weight vector. Q1. Why ...
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1answer
302 views

Calculate the historical simulation VaR of the portfolio using Python

Assume that we have 200 stocks in WeiBo (WB), 300 stocks in Netflix (NFLX), 250 stocks in Ford Motor Company (F) and 150 in Royal Dutch Shell (RDS-A) as of 31 August 2019 in the portfolio. I have ...

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