Hello,

after stumbling upon this blog post I wonder if there is a comprehensive list of portfolio models? (If not, maybe this question could serve as community wiki?)

asked 15 Apr '10, 12:00

Karsten%20W.'s gravatar image

Karsten W.
203118
accept rate: 0%


R has a great list of Financial packages including a "portfolio" package. From the site... The portfolio package contains classes for equity portfolio management; the portfolioSim builds a related simulation framework and tradeCosts estimates the potential impact of trades on the prevalent market prices. The backtest offers tools to explore portfolio-based hypotheses about financial instruments. The stockPortfolio packages provides functions for single index, constant correlation and multigroup models.

http://cran.opensourceresources.org/web/views/Finance.html

link

answered 15 Apr '10, 12:47

larrydag%201's gravatar image

larrydag 1 ♦
3.2k61426
accept rate: 9%

It is good to know that there readily available package. I am looking for information on what a single index model etc. is, i.e. what the underlying mathematical model is.

(15 Apr '10, 13:34) Karsten W.

R has an implementation of CVaR. It is always very helpful.

(16 Apr '10, 05:09) Mark ♦

Some of the new developments in the field has been on using conic programming on the Markovitz model see this paper

http://linkinghub.elsevier.com/retrieve/pii/S0167637708000588

link

answered 15 Apr '10, 19:01

Mark's gravatar image

Mark ♦
3.6k22550
accept rate: 9%

OK, here is the classical portfolio optimization (the Markovitz model)

Var(R) = sum_i sum_j w_i w_j Cov(R_i, R_j) --> min!

subject to

ER = sum_i w_i ER_i is fixed
sum_i w_i = 1
w_i >= 0 for all i

where

R ... portfolio return
R_i ... return of position i in the portfolio
w_i ... the portion of position i in the portfolio
ER, ER_i ... the expected return
Var(R) ... the variance (or risk) of the portfolio
Cov(R_i, R_j) ... the variance/covariance of the return of two positions

Now the solution of this problem gives a composition of the portfolio with the least risk given an expected return (which characterizes the portfolio strategy).

I hope I stated it right. If you see any error, feel free to correct it. I made it a community wiki for that purpose ...

What I do not see is the equivalence to the problem formulated the blog post I cite in the question...

link
This answer is marked "community wiki".

answered 19 Apr '10, 20:06

Karsten%20W.'s gravatar image

Karsten W.
203118
accept rate: 0%

The equivalence is shown by another great post of Mr Kavelagen -- http://tinyurl.com/35zqhrw

(24 Apr '10, 17:01) Karsten W.
Your answer
toggle preview

Follow this question

By Email:

Once you sign in you will be able to subscribe for any updates here

By RSS:

Answers

Answers and Comments

Markdown Basics

  • *italic* or _italic_
  • **bold** or __bold__
  • link:[text](http://url.com/ "Title")
  • image?![alt text](/path/img.jpg "Title")
  • numbered list: 1. Foo 2. Bar
  • to add a line break simply add two spaces to where you would like the new line to be.
  • basic HTML tags are also supported

Tags:

×29

Asked: 15 Apr '10, 12:00

Seen: 1,780 times

Last updated: 19 Apr '10, 20:06

OR-Exchange! Your site for questions, answers, and announcements about operations research.