Tag Archives: implied alpha
Implied alpha and minimum variance
Under the covers of strange bedfellows. Previously The idea of implied alpha was introduced in “Implied alpha — almost wordless”. In a comment to that post Jeff noticed that the optimal portfolio given for the example is ever so close to the minimum variance portfolio. That is because there is a problem with the example … Continue reading
Posted in Quant finance, R language
Tagged implied alpha, minimum variance portfolio, reverse optimization
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Highlights of the London Quant Group Technology Day
A summary of the high points of the day. Factor models and optimization Three of the talks formed a theme: factor models of variance — especially as applied to portfolio optimization. The basic problem is that variance matrices are created with error. A variance matrix is a key input to (some) portfolio optimizations. The optimizer … Continue reading
Implied alpha — almost wordless
We have a portfolio with weights A=20%, B=60%, C=20%. That we have this particular portfolio is really a market prediction. What are the returns that the portfolio is “expecting”? In technical terms, we want the implied alpha of the portfolio (found via reverse optimization). We’ll explore this in a mostly pictorial fashion. Eventually we do … Continue reading
