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Category Archives: Blog
Three talks from CFE
The Computational and Financial Econometrics conference was just held in London. Here are three talks from the large menu. Lars Helge Hass The objective is to find a way to do an asset allocation optimization that includes private equity. A problem of course is that private equity is seriously opaque. To highlight that, using one … Continue reading
Posted in Quant finance
Tagged portfolio optimization, regime switching model, variance compression
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Portfolio optimization inside out
A possible way to search for constraints that improve optimization. The perspective The usual way of thinking about portfolio optimization is to first consider the utility and then restrict to where the constraints are satisfied. A perfectly reasonable view. We use random portfolios to get a different point of view: first ensure that the constraints … Continue reading
There’s news and there’s news
Two recent posts included the word “news”, but in different senses. Events “News” in the sense of reports on events was discussed in “News analytics”. We can think of this as an approximation to objective reality. Market moves The post “Volatility estimation and time-adjusted returns” used “news” in the sense of “that which moves market … Continue reading
Volatility estimation and time-adjusted returns
Do non-trading days explain the mystery of volatility estimation? Previously The post “The volatility mystery continues” showed that volatility estimated with daily data tends to be larger (in recent years) than when estimated with lower frequency returns. Time adjusting One of the comments — from Joseph Wilson — was that there is a problem with … Continue reading
Posted in Quant finance, R language
Tagged S&P 500, time-adjusted returns, variance compression, volatility
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Searching for inspiration on financial risk
Two people, two sources. Planes Deus ex Macchiato has a post called “Planes not bridges” in which it is suggested that learning from air traffic investigators makes sense. The logic is that a large component of plane accidents is caused by human (mis)beliefs. So perhaps finance can imitate air safety in reducing the frequency of … Continue reading
Posted in Risk
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News analytics
Last week was the news analytics workshop at Birkbeck College. The idea There is room in news analytics for a large range of approaches. The leading model runs along the lines of: something happens a journalist (possibly a machine) creates a news item the news item is captured, time-stamped and given an id the news … Continue reading
LondonR recap
The biggest and perhaps best meeting yet. The talks James Long: “Easy Parallel Stochastic Simulations using Amazon’s EC2 & Segue”. This was a lively talk about James’ package to use Amazon’s cloud to speed up a (huge) call to lapply. The good part is that if you want to use Amazon as your cloud provider, … Continue reading
Posted in R language
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The volatility mystery continues
How do volatility estimates based on monthly versus daily returns differ? Previously The post “The mystery of volatility estimates from daily versus monthly returns” and its offspring “Another look at autocorrelation in the S&P 500” discussed what appears to be an anomaly in the estimation of volatility from daily versus monthly data. In recent times … Continue reading
Posted in Quant finance, R language
Tagged autocorrelation, S&P 500, variance compression, volatility
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Alpha decay in portfolios
How does the effect of our expected returns change over time? This is not academic curiosity, we want to know in the context of our portfolio if we can. And we can — we visualize the effect of expected returns in situ. First step The idea is to look at the returns of portfolios that … Continue reading
Posted in Quant finance, R language, Random portfolios
Tagged alpha decay, expected returns, MACD, realized alpha
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The carry trade — almost wordless
The idea Borrow in a currency with low interest rates, lend in a currency with high interest rates. The image Photo by Patti via stock.xchng The question Am I wrong? Subscribe to the Portfolio Probe blog by Email