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Portfolio Optimization

Portfolio Optimization. I Discuss aspects of PO, including the Efficient Frontier, Capital Allocation Line, Modern Portfolio Theory and Portfolio Correlation. II Discuss how LTCM’s Portfolio Optimization went wrong, including the portfolio’s correlation factor.

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Portfolio Optimization

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  1. Portfolio Optimization I Discuss aspects of PO, including the Efficient Frontier, Capital Allocation Line, Modern Portfolio Theory and Portfolio Correlation. II Discuss how LTCM’s Portfolio Optimization went wrong, including the portfolio’s correlation factor. III Discuss Portfolio Optimization and some problems associated with it. IV Contrast a simpler alternative to more elaborate strategies while producing more consistent performance

  2. I a

  3. http://www.creativewealthstrategies.com/Modern_Portfolio_Theory.dochttp://www.creativewealthstrategies.com/Modern_Portfolio_Theory.doc I b

  4. I c

  5. The Efficient Frontier for S&P 100 http://www.nag.co.uk/doc/TechRep/Pdf/tr2_00.pdf I d

  6. http://www.moneychimp.com/articles/valuation/capm.htm I e

  7. http://en.wikipedia.org/wiki/File:Markowitz_frontier.jpg Efficient Frontier. I f

  8. Portfolio Optimization with two assets Corporate Bond Treasury Risk-free Optimal Portfolio Value at Risk, 3rd Ed.: The New Benchmark for Managing Financial Risk, Philippe Jorion, pps 557-563 II a

  9. Portfolio Optimization Capital Allocation Line The Efficient Frontier Corporate Bond Treasury Bond Value at Risk, 3rd Ed.: The New Benchmark for Managing Financial Risk, Philippe Jorion, pps 557-563 II b

  10. www.indexfundeducator.com II c

  11. www.indexfundeducator.com II d

  12. www.indexfundeducator.com II e

  13. Risk and the Number of Securities Risk (% pa) Number of Securities Value at Risk, 3rd Ed.: The New Benchmark for Managing Financial Risk, Philippe Jorion, pps 557-563 II f

  14. Value at Risk, 3rd Ed.: The New Benchmark for Managing Financial Risk, Philippe Jorion, pps 557-563 II g

  15. default-rate volatility Moody’s Investor Services, Alexandra Berthault II h

  16. III a http://www.travismorien.com/FAQ/portfolios/mptcriticism.htm

  17. IV a

  18. IV b

  19. Passive Investing Produces Better Returns Over Time IV c

  20. The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective. - Warren Buffett http://www.travismorien.com/FAQ/portfolios/mptcriticism.htm IV d

  21. To summarize: Optimum portfolio is where Efficient frontier meets the CAL http://www.moneychimp.com/articles/valuation/capm.htm

  22. Lessons learned from LTCM Value at Risk, 3rd Ed.: The New Benchmark for Managing Financial Risk, Philippe Jorion, pps 557-563

  23. MPT Not Realistic http://www.travismorien.com/FAQ/portfolios/mptcriticism.htm

  24. Passive Investing Produces Better Returns Over Time

  25. Thank you

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