7
votes
Cross Currency Swap Attribution
As for the book, the best one I have come across is Pricing and Trading Interest Rate Derivatives by Darbyshire, although it's a bit pricey (indeed as most finance books are) (https://www.amazon.com/...
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5
votes
Accepted
Sharpe ratio: discrete or continuous returns?
For client reporting purposes, it is customary to use discrete returns. For backtesting, it pretty much make no difference.
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5
votes
Calculate Average Price, Cost, (Un)Realized P&L of a position based on executed trades
Using Andy Flury answer and bit polishing it gives following Python class for PnL calculator:
...
- 221
5
votes
Accepted
best way to calculate the return
The language would matter but if performance is an issue you would want to make sure that the code is optimal. Optimized assembly code for a single return calculation looks like this (on Godbolt):
<...
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4
votes
Multi-Period Contribution
Thanks for the example. It is exactly like my comment. Look at your weights after the first period. Are they really 80% and 20%?
Lets say you have £100 to invest.
£80 is invested in product A. That ...
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3
votes
Calculate Average Price, Cost, (Un)Realized P&L of a position based on executed trades
Using @mde answer's for the average price method and developing it for Fifo method:
...
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3
votes
How to calculate performance of a private equity investment?
I am not an expert on GIPS, with its many pages of rules, but I do remember that under GIPS Private Equity results are to be given in terms of IRR (Internal Rate of Return). In most other cases (stock/...
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2
votes
Accepted
How to calculate standard deviation cone around expected returns?
The returns (or rather alphas, i.e. returns relative to the benchmark) plotted are logarithmic returns, not the simple returns usually reported by investment managers. This makes them additive over ...
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2
votes
Cross Currency Swap Attribution
I believe that cross currency basis swaps are marked to market always. The issue is that theoretical value for an xccy swap is always 0. but they don't trade at 0, that's why there is a premium for ...
- 2,683
2
votes
Can alpha be positive if cumulative returns underperform the benchmark?
The best example of an underperforming strategy with big alpha, is insurance.
Every year you pay a premium to insure your house. That strategy has negative expected return, negative beta, but super ...
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2
votes
Can alpha be positive if cumulative returns underperform the benchmark?
Yes, this is absolutely possible. Here is a simple thought experiment to show how.
We want to benchmark to the S&P 500. We allocate 90% of our capital to an index tracking strategy and 10% to some ...
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2
votes
Regression based performance attribution with dummy variables
You are right that if you use binary dummy variables for $n$ possible values of some feature (the country in your case) you need only $n-1$ variables because the last (or first) country is indicated ...
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2
votes
Accepted
Ex-Ante Tracking Error : active strategies and the size of the covariance matrix
There's nothing in the math that says a portfolio can only put non-zero weights on securities where the benchmark puts positive weights. So I'm not sure I understand your problem?
Quick math review
...
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2
votes
Multi-Period Contribution
If you use geometric period returns (aka "continous", "exponential"), you can calculate an arithmetic average and this will give you the same result as if you would calculate this ...
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1
vote
How would one define MSCI World Index + 3% or S&P 500 + 3%?
OP here. What I have done is to add the same spread to each month in the same calendar year, such that the calendar year return equals MSCI return + 3%. This means different monthly spreads in ...
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1
vote
best way to calculate the return
Any difference would be negligible. On the other hand, there are statistical advantages when calculating the log return. Remember that the log return is simply the log difference of the value / price ...
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vote
Cross Currency Swap Attribution
The question is subjective.
Suppose you have a USD based accounting framework and an interest rate swap in NOK.
At the accounting period 1 the USDNOK is 10, and the IRS is worth 100 NOK (10 USD).
At ...
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1
vote
Difference between Sharpe Ratio and Information Ratio when measuring Hedge Fund performance?
Sharpe is (Portfolio Return - RFR) / Standard Deviation.
Information Ratio is (Portfolio Return - Benchmark Return) / Tracking Error,
where tracking error is the standard deviation of the active ...
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1
vote
Out-of-sample performance
Holding period return would be more appropriate. Calculate your one week return by using your ending portfolio NAV. The easiest way to do this would to be to store number of shares in each position ...
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1
vote
Composite portfolio performance
It depends what you assume as to rebalancing between the portfolios.
Unless these portfolios are being actively rebalanced each quarter to bring them back to exactly 32/68 allocation you should not ...
- 9,440
1
vote
Contribution to Return - from security to portfolio
To compute the total contribution to return (CTR_i₍ₜ,ₜ₊₁₀₎) for each security over a period (from day t to t + 10) such that the sum of all securities' contributions equals the portfolio's total ...
- 11
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vote
Ways to calculate daily returns
the initial_account_equity might refer to the base capital amount.
in this case, it will not be "yesterdays" value...
you need to check the packs help docs.
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1
vote
Ex-Ante Tracking Error : active strategies and the size of the covariance matrix
As a simple answer, the covariance matrix should not represent only assets in the benchmark. It should include the universe of assets. As an example, a benchmark might be 60% US Large Stocks and 40% ...
- 196
1
vote
Sharpe ratio: discrete or continuous returns?
These are the realized return and standard deviation for the portfolio over the period.
Source: Paul Wilmott on Quantitative Finance, sec. ed., p. 329-330
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