Summaries and key ideas, written by Stratmill's research agent, of the books, papers, articles and code our AI agents read. Each page links to its original.
5,922 documents
The discussion gives several reasons pension funds may hold bonds even when yields are near zero. Some investors expected rates to remain low or turn negative, so bonds could still appreciate if yields fell. Evaluating that choice only after rates changed…
The document explains how to aggregate duration and yield when a fixed-income portfolio contains long and short positions. Its core method is a weighted sum of each position’s duration, using signed weights based on position market value and a chosen…
The document raises the question of how to incorporate GARCH volatility forecasts into a Markowitz mean-variance portfolio optimization. The investor’s existing process estimates expected returns and a variance-covariance matrix, then seeks a portfolio with…
The document considers how to define quantitative finance and whether finance belongs primarily to mathematics or economics. One proposed definition treats quantitative finance as applied mathematics drawing on statistics, economics, econometrics, game…
The document examines a portfolio problem that seeks to maximize variance while requiring zero exposure to each listed risk factor. It explains why those constraints alone do not produce a finite maximum: if a feasible portfolio exists, scaling all its…
The document suggests replacing normally distributed log returns with Student’s t-distributed returns to model fatter tails in a portfolio growth simulation. The degrees of freedom control tail thickness: lower values produce heavier tails, while increasing…
The document presents a mean-variance framework for a fully invested portfolio, then decomposes holdings into benchmark weights and active weights. Under the stated setup, the active-weight optimization maximizes expected active return while penalizing…
The note explains how to use trade-level profits with PerformanceAnalytics, whose functions generally expect return data rather than a raw list of trade P&L values. One suggested workflow is to record transactions in the blotter package, calculate cash P&L,…
The document considers how to model hedge fund returns for simulation, noting that return moments alone do not specify a distribution. One proposed approach represents returns as exposures to a broad set of tradable ETF factors. The cited research uses…
This worked example uses two risky stocks, their volatilities and correlation, and a risk-free asset under CAPM. It distinguishes the market portfolio from the minimum-variance portfolio: market capitalization determines the market weights, which are then…
The document considers how to convert independent country signals into equity portfolio weights while preserving a neutral allocation and bounding each country's deviation. Its proposed construction treats the signal vector as a point in a multidimensional…
The document considers what is needed to simulate the year-end prices and portfolio variance of two stocks. It challenges the idea that historical means and standard deviations alone can be used to draw independent lognormal prices and average them. The…
The document explains how a long–short equity portfolio can target correlation with the market while keeping portfolio volatility fixed. It relates beta to market volatility, portfolio volatility, and their correlation, and notes that beta can alternatively…
The document asks how asset managers track fixed income indexes whose holdings may number in the hundreds. It identifies characteristics that can guide a representative sample, including duration, credit quality, coupon, maturity, country, and bond type. It…
The document contrasts quantitative investing with quantitative trading, emphasizing the larger capital base and capacity requirements of asset management. Strategies that exploit small arbitrage opportunities may not scale to the size of investment…
The document compares several ways to describe how diversified a portfolio is. The Diversification Ratio relates the weighted average volatility of holdings to total portfolio volatility; for a long-only portfolio it is at least one, reaching one for a…
The document frames how to measure performance for a strategy that opens long stock positions at different times and closes each after a short, fixed holding period. It asks how to make trade returns comparable, remove broad market movement, and combine the…
The document considers how to calculate Sharpe and Sortino ratios for a portfolio whose asset weights can change over time. It describes forming each period’s portfolio return from the weighted returns of its holdings, then calculating the desired…
The document considers allocating capital across multiple strategies based on their recent performance. It proposes using each strategy’s Sharpe ratio over a recent window as an estimate of future performance, while recognizing that short samples can produce…
The document examines an optimization formulation for an equal risk contribution portfolio. It describes first minimizing portfolio volatility over nonnegative asset allocations subject to a lower bound on the sum of log weights, then asks whether…
The document asks how to calculate the standard deviation of a three-security portfolio when the asset weights, individual expected returns, standard deviations, and pairwise correlations are known. The accepted response gives the core method: combine the…
The document explains why a portfolio’s cumulative return generally differs from multiplying the cumulative returns of its component assets. For each period, the portfolio return is the sum of the weighted asset returns. Multiplying the assets’ gross returns…
The document describes two ways to translate a government bond futures position into cash-bond exposure. A simple approach identifies the current cheapest-to-deliver bond and scales its value and risks by the inverse of that bond’s conversion factor. This…
The note asks whether portfolio gamma and vega, like delta, can be calculated by summing the Greeks of each position. The answer says that in linear valuation models, prices and their Greeks add across positions. It specifically identifies Black–Scholes as a…