Questions tagged [portfolio]

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29 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 (...
2
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0answers
73 views

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. ...
2
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0answers
37 views

Which performance evaluation measure to assess “Connectedness Matrix” based porfolios?

1. Question 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 "...
2
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1answer
150 views

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 ...
2
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0answers
53 views

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, ...
2
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0answers
81 views

Portfolio of single stock short put options: which correlation structure preferrable?

Let's say you want to have a equally-weighted (in terms of the option price) portfolio of short put options on various stocks with the same maturity. Running Monte-Carlo simulations, it seems that ...
2
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0answers
268 views

Minimum Variance Portfolio problem [closed]

Minimum Variance Portfolio Suppose there are N stocks in the investmentable universe and we have a fully invested portfolio investing 100% of the capital. The Covariance matrix is denoted as ∑. We ...
2
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0answers
179 views

Liquidity Adjusted Asset Pricing Model

I have a data set with 4000 companies and I have calculated a liquidity measure of each of the company in the dataset as Where, Turnover is the monthly average ratio of daily volume to shares ...
2
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0answers
223 views

Behaviour of out of sample efficient frontier

I am comparing the efficient frontier of a set of portfolios that are in and out of sample. The first period is from 1991-01-03 until 1992-10-03 and the second one from 1992-10-03 until 1994-03-03. I ...
2
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0answers
47 views

How to calculate the estimation error of portfolio variance using propagation results?

I am trying to find a conservative approximation for the propagated estimation error of a investment portfolio's variance (comprising two assets), given we know the estimation error for the variance ...
2
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0answers
43 views

Budget Constraint in Duffie's book

On Page 5 of Duffie's Dynamic Asset Pricing Theory, the budget-feasible set is defined as: $$X(q,e) = {e+D^T\theta \in R_+^s:\theta \in R^N, q\theta \leq 0}$$ Compared to Kerry Back's presentation of ...
2
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0answers
62 views

Portfolio optimised for diversification and regular yield. How to hedge?

Here is a portfolio optimisation for equity dividend and yield designed to diversify holdings and produce regular monthly returns using only ETFs complete with R code. http://prescientmuse.blogspot....
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154 views

Sharpe Ratio for loans

I am trying to calculate the sharpe ratio for a set of loans. These loans have already matured and I know if they were good or not: grades are the different grades of the loans. interest rate is the ...
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0answers
286 views

What happened to Mountain View Analytics?

I stumbled over Thomas Cover's work on algorithmic portfolio selection; apparently, an outfit called "Mountain View Analytics" attempted to implement the suggestions from Cover's research. ...
2
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1answer
237 views

Why does my posterior mean differs from Idzorek's results?

I have implemented two different expressions (Idzorek p.6, Walters p.51) of a posterior mean return calculation within a Black-Litterman framework. My results are the same, irrespective of the ...
2
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0answers
141 views

Portfolio insurance with a coherent risk measure (CVaR)

I would like to analysis of portfolio insurance under a coherent risk-measure method (CVaR), How can I achieve that? Is there a way to turn the problem into a linear programming problem? or to ...
2
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0answers
136 views

Calculating stock weight for SEC13F filers

I am trying to evaluate weight of stocks in portfolio for an investor. For this purpose I use SEC13F filings for particular quarters and historical prices from Yahoo. There are stocks in portfolio ...
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3answers
113 views

Calculating Correlation of Two portfolios?

So I'd like some help w/ this question. Given 3 assets with means, variances, and correlation: Two portfolios are created (A and B), each with the three assets above with weights ($w_n$) as follows: ...
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3answers
106 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
88 views

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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1answer
88 views

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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2answers
98 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
83 views

Analyzing stock performance - keep companies after bankruptcy?

I am currently analyzing the performance of stocks with high/low corporate social responsibility rating. Some companies went bankrupt during the observation period and I wonder how long I should keep ...
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1answer
108 views

Portfolio construction

Suppose I have 3 stocks. Their historical returns and some variables like RSI, ATR, EMAs for all 3 of them. The goal is to compute the weights each stock should have in a portfolio. If I do something ...
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1answer
165 views

optimization with absolute constraints

Suppose I have an optimization where I need to impose ADV-like constraint (for a case where Shorting is allowed): $\max \mu'w - \lambda w'\Sigma w$ $ |w| \le V $ $ Aw = 0$ and I want to use a ...
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2answers
222 views

Calculate alpha (CAPM) in “cross country-portfolio”

Assume I wanted to compute the alpha (in CAPM sense, i.e. $r_i - r_f = \alpha_i + \beta_i(r_m - r_f) + \epsilon_i$) of a stock. So I take, say, monthly returns of a stock $i$ for 1 year. Subtract the ...
1
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1answer
50 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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2answers
126 views

Measuring returns

always come across the issue of which return to use. There a three types that I know about. The simple return, the log return and the geometric return. Now I wonder whether it depends on the subject ...
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2answers
225 views

How to calculate optimal portfolio using sector constraints in python

I'm looking into CVXPY at the moment. Main goal would be to be able to calculate the optimal portfolio, which in my opinion would mean that we need to maximise (expected return - risk free) / ...
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2answers
103 views

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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1answer
47 views

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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1answer
99 views

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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2answers
56 views

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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1answer
98 views

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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1answer
104 views

Variance of returns on a portfolio

This must be very basic, but I don't seem to be able to express the variance of returns on a portfolio in terms of variances-covariance sum of returns of its constituents, which seems to be what is ...
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2answers
268 views

How do I estimate the volatiliy of my portfolio with an estimator that requires High, Low, Open, etc

I have obtained the daily returns of my portfolio $R^{port}_t$ using a certain strategy. Now I want to estimate the realized volatility $\sigma^{port}_t$ using the past 60 days. An obvious way to do ...
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1answer
83 views

Self-financing portfolio under $Q$-dynamics

I know what given stocks $S_1, ..., S_N$ with SDE's, a portfolio must have a particular value dynamics shape (which depends on the dynamics of $S_1,...,S_N$), if that portfolio is to be self-financing....
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1answer
130 views

Converting Contribution To Risk from Variance to Stdev

So we have the basic structure: $\sigma^2_{Pxy} = w_x^2 \sigma_x^2 + w_y^2 \sigma_y^2 + 2 w_x w_y \sigma_{xy}$ $\sigma^2_{Px} = w_x^2 \sigma_x^2 + w_x w_y \sigma_{xy}$ $\sigma^2_{Py} = w_y^2 \...
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1answer
2k views

Calculate CVaR for a portfolio

I would like to calculate the Conditional Value at Risk for a portfolio. To be honest, I'm trying for a few days to find an example to calculate for an entire portfolio, not just for one security and ...
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1answer
83 views

Replication of the portfolio in single step binomial model

I would be grateful if anyone would comment how to construct this: Assume $S_{i}^k$ is a stock price at time level $i$ and at price level $k$. Assume option is written on $S$ with a a payoff $f_{T}^{...
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1answer
1k views

Portfolio optimzation : efficient frontier with respect to risk aversion parameter with R

I am currently trying to write a little script in R to determine the optimal weights given a fixed risk aversion parameter. The problem I have is that by increasing the risk aversion parameter I think ...
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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 $\...
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2answers
368 views

Risk management of options

Your client would like to buy a digital call option. the digital call option pays the buyer in one years time (i.e at maturity ) N=1m SGD, if the SGD USD spot rate at maturity is above a prescribed ...
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1answer
37 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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1answer
37 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
78 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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2answers
74 views

How do I know what my portfolio weight constraints are given to me by my broker?

I have started exploring portfolio optimization results that pop out when I don’t constrain the weights to sum to 1. For instance, in a dollar-neutral portfolio, the weights sum to 0. Also, some ...
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1answer
57 views

Why no median-CVaR optimization for portfolios?

Question 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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1answer
152 views

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.