Conditional Value-at-Risk Portfolio Optimization

Mean-Absolute Deviation Portfolio Optimization

Stochastic Differential Equation (SDE) Models

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Quantitative investment managers and risk managers use portfolio optimization to choose the proportions of various assets to be held in a portfolio. The goal of portfolio optimization is to maximize a measure or proxy for a portfolios return contingent on a measure or proxy for a portfolios risk. This toolbox provides a comprehensive suite of portfolio optimization and analysis tools for performing capital allocation, asset allocation, and risk assessment.

Background theory for Portfolio optimization problems

Create Portfolio object, evaluate composition of assets, perform mean-variance portfolio optimization

Conditional Value-at-Risk Portfolio Optimization

Create portfolios, evaluate composition of assets, perform CVaR portfolio optimization

Mean-Absolute Deviation Portfolio Optimization

Create portfolios, evaluate composition of assets, perform MAD portfolio optimization

Analyze portfolio for returns variance and covariance, simulate correlation of assets, calculate portfolio value at risk (VaR)

Set up a basic asset allocation problem that uses mean-variance portfolio optimization with a Portfolio object to estimate efficient portfolios.

The following sequence of examples highlights features of the Portfolio object in the Financial Toolbox. Specifically, the examples use the Portfolio object to show how to set up mean-variance portfolio optimization problems that focus on the two-fund theorem, the impact of transaction costs and turnover constraints, how to obtain portfolios that maximize the Sharpe ratio, and how to set up two popular hedge-fund strategies – dollar-neutral and 130-30 portfolios.

Demonstrates optimizing a portfolio to maximize the information ratio relative to a market benchmark.

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