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Portfolio Optimization

Delve into portfolio optimization with and without transaction costs, explore Markowitz's mean-variance model, Sharpe ratio, downside risk, and high-order moments. Dive deep with Ralph's fractional trading model and scenario-based analysis for optimal asset allocation.

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Portfolio Optimization

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Presentation Transcript

  1. Portfolio Optimization • Literature Review • Portfolio Optimization without Transaction Costs • Portfolio Optimization with Transaction Costs

  2. Markowitz Return Mean-Variance Model Risk Sharpe Skewness Arrow Basic Scenario-Based Portfolio Optimization Downside Risk Merton High-Order Moments Ralph

  3. Mean-Variance Model • Markowitz, H. (1991), Portfolio Selection, 2nd Edition, USA: Blackwell. • Sharpe, W. (1970), Portfolio Theory and Capital Markets, New York: McGraw-Hill.

  4. Scenario-Based Analysis: • Arrow, K. (1970), Essays in the Theory of Risk Bearing, Amsterdam: North Holland. • Merton, R. (1990), Continuous Time Finance, Oxford:Blackwell.

  5. Ralph’s Optimal Fractional Trading Model • Ralph, V. (1990), Portfolio Management Formulas: Mathematical Trading Methods for the Futures, Options and Stock Markets, New York: John Wiley & Sons.

  6. Ralph’s Optimal Fractional Trading Model • Ralph, V. (1992), The Mathematics of Money Management: Risk Analysis Techniques for Traders, New York: John Wiley & Sons. • Ralph, V. (1995), The New Money Management: A Framework for Asset Allocation,New York: John Wiley & Sons.

  7. Portfolio Optimization • What is it? • Mathematics

  8. Portfolio Optimization with Transaction Costs • Transaction Costs • Mathematics

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