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 document asks how to calculate a daily percentage return for a position that is long one stock and short a scaled amount of another. It presents two candidate expressions: one subtracts the scaled log return of the short asset from the long asset’s log…
The discussion considers whether a risk model can include only selected industry factors, using tobacco and healthcare as examples, and whether an additional category for all other industries is required. The answer gives a basic redundancy principle: a…
The document describes a bond portfolio optimizer that maximizes yield subject to allocation limits, including duration, issuer, sector, and rating constraints. The author adds a requirement that a specified number of bonds must receive at least a minimum…
The discussion offers starting points and practical cautions for optimizing portfolios against value at risk (VaR). It recommends Euler capital allocation as an introduction, then describes a simulation approach: hold a large set of scenarios fixed and…
The document derives a proposed upper bound for expected log growth in a one-period market with a riskless asset, a risky asset, and enough derivatives to replicate arbitrary terminal payoffs. It compares the real-world distribution of the asset price with a…
This exchange considers whether CAPM or a multi-factor asset-pricing regression requires the portfolio being analyzed to be efficiently diversified. The answer says statistically significant coefficients can still be interpreted when the portfolio does not…
The document asks how to find a tangency portfolio when weights must lie between negative one and one while summing to one. It frames the objective as maximizing the portfolio’s expected return divided by its volatility, and asks whether the added bounds…
The document examines Stambaugh’s method for combining asset returns when one asset has a longer history than another. It considers a full-history asset X and a later-starting asset Y, focusing on how the shorter sample’s regression of Y on X contributes to…
The document considers which MATLAB toolboxes are useful for a risk analyst, including optimization, global optimization, econometrics, financial, and statistics tools, alongside database and market-data access. One practitioner reports that their team…
The document poses a risk management question: how to choose a withdrawal fraction and a profit threshold for taking money out of a trading account while balancing ruin risk against compounding. It gives an illustrative proposal based on withdrawing part of…
The document formulates a linear optimization problem for portfolio allocations. Its objective maximizes a weighted measure of portfolio spread under a budget constraint and other unspecified limits. A further constraint requires the sum, across assets, of…
The document asks how to revise a historical correlation matrix when one pairwise correlation receives new information, while retaining as much of the original matrix as possible. Its example considers changing the equity–Treasury relationship and asks how…
The document raises a practical estimation question about the diffusion matrix in a multivariate financial model. It focuses on a setup in which factor or eigenportfolios are constructed to have zero covariance, making a covariance estimate based directly on…
The document explains why a long-only minimum-variance optimizer may assign positive weights to only a few assets, even when the investment universe contains many ETFs. The question concerns a portfolio built from monthly returns for U.S. equity and bond…
The question asks whether securities in an efficient portfolio share the portfolio’s Sharpe ratio and how this relates to a covariance-based return measure. The response gives the portfolio standard deviation as the square root of the portfolio weights…
The note explains a procedure for building annual industry portfolios from individual stock returns. Stocks are assigned to industries by their four-digit SIC classifications, using NYSE, AMEX, and NASDAQ listings. The industry assignment is made at the end…
The document considers how to chart performance for a portfolio rebalanced quarterly when the input series contains daily log returns. It compares geometric and non-geometric settings in a performance summary and asks whether the non-geometric result…
This question sets up a two risky-asset example for learning the Black–Litterman portfolio model. It starts with CAPM estimates for the assets, including a market return, asset betas, residual volatility inputs, and a risk-free rate, then asks how to derive…
The discussion distinguishes minimizing a portfolio’s own volatility from replicating an index, where minimizing tracking error is usually the more relevant objective. One proposed formulation selects at most a specified number of nonzero stock weights,…
The answer explains how to bootstrap a forecasting curve separately from an overnight-indexed discount curve in QuantLib. In the example, an OIS curve is built first for discounting, while a LIBOR curve is bootstrapped for forecasting. Swap-rate helpers for…
The document asks whether every mean-variance efficient portfolio has another efficient portfolio with zero correlation to it. The proposed construction combines a chosen portfolio with the minimum-variance portfolio, varying the combination weight to make…
The document frames European call pricing on a finite binomial stock tree as a superhedging problem. With zero interest, the goal is to find the least initial wealth that can fund a bond-and-stock portfolio, adjusted at the tree’s nodes without later cash…
For assets with equal expected returns and no correlations, the response derives the global minimum-variance portfolio weights. It begins with the general solution: multiply the vector of ones by the inverse covariance matrix, then normalize so the weights…
The response explains why covariance information alone cannot determine the Markowitz efficient frontier, which describes the trade-off between portfolio risk and expected return. Since expected returns affect optimal portfolio weights, removing them leaves…