Questions tagged [portfolio-theory]

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How do I use the Malliavin calculus to solve for the optimal trading strategy in the classic Merton problem?

How do I use the Malliavin calculus to solve for the optimal trading strategy in the classic Merton problem? In Duffie's book "Dynamic Asset Pricing," he outlines the "Martingale method" of solving ...
3
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0answers
60 views

Mean Variance Optimization in a Utility Maximization Framework

I'm struggling to gain a broad understanding of Mean-Variance utility theory as it relates to finding the efficient frontier of a group of assets which each have some return and variance. The typical ...
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161 views

Fundamental Theorem of Asset Pricing (Linear Algebra)

I saw this question in a textbook that I was recently reading and don't really know how to aprpoach this problem. Let $H$ be a finite dimensional vector space with inner product ($\cdotp$, $\cdotp$)....
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239 views

Calculating the optimal portfolio for an investor with quadratic utility

The problem is from Asset Pricing and Portfolio Theory by Back and can be found here. The relevant info from section 2.5 can be found here. Given that we have the Expected value and the variance of ...
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Simple mortgage portfolio amortization

I have a large residential mortgage portfolio that has fixed and arm mortgages. I want to roughly calculate the amortization of the arm portfolio by year without delving into loan by loan calculations....
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16 views

Empirical estimates of beta for Mean-variance model

I need to evaluate a lottery according to mean-variance formulation for utility. That is to say, given a lottery X, its utility is given by U(X) = E(X) - bVar(X) where E(X) and Var(X) are the mean ...
1
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114 views

Markowitz Minimum Variance Line - maximise return with a given variance?

There are many example online of how to use Lagrange multipliers to solve Markowitz's minimum variance problem (namely find the weightings for the portfolio which minimises variance for a given ...
0
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2k views

Finding the covariance of a stock portfolio

So my question goes like this, I have the returns of 3 different stocks AAPL, NKE and BBRY I make 4 portfolios out of them as follows: and the question asks me to compute the correlation coefficient ...