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There are some subtleties / difficulties. Implied volatiliy, which depends on the strike of a vanilla option, is only a forward looking measure in the sense that it can be regarded as the risk-neutral expectation of break-even delta-hedging profit and loss of a vanilla option of strike $K$ which is delta hedged to expiration using a constant volatility. If ...


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Let’s put it this way. Classic MV is still used, but its shortcomings are universally appreciated. In its favour, the process is logical, conceptually intuitive, and non-quants easily understand it. But the optimisation produces some very unintuitive results, no different to multicollinearity effects in regression analysis. That’s a harder one for the non-...


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You can think of it as the number of trading positions on Uncorrelated instruments, in a year. So backtest your strategy in some uncorrelated instruments for a year, and sum their positions count.


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Portfolio beta is a function of market vol, portfolio vol and correlation between market and portfolio; so correlation is indeed the only free variable. (But if you have complete control over the portfolio-construction process, you might as well target beta and then scale the weights so that you meet your volatility target.) To control correlation, you'll ...


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Your problem formulation is wrong, you must use the Charnes and Cooper transformation. This means that your constraint (mu-mu0)@y==1 must be (mu-mu0)@y==k and w=y/k, which implies that k==cp.sum(y).


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