# Questions tagged [portfolio-theory]

The tag has no usage guidance.

29 questions
Filter by
Sorted by
Tagged with
467 views

### 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 ...
283 views

### Optimal consumption in Merton-like portfolio choice model with constant wage

My Questions Consider the following problem. It is almost identical to the classic Merton portfolio choice problem. Here I'm solving it using the so-called Martingale method. I have provided my ...
48 views

### given someone's past investing history, is there a way to calculate his risk aversion?

given someone's past investing history, is there a way to calculate his risk aversion? Say, we know this client's investment history for example his past return, is there a way to calculate his risk ...
98 views

### Finding a maximal growth portfolio

I have the following problem that asks me to solve for the "maximal growth portfolio." Suppose that the equilibrium stochastic discount factor evolves as  \log S_{t+1} - \log S_t = \kappa_s(X_t,...
330 views

### Why stochastic dominance is “stochastic”?

I think the CDF is pretty much fixed, so the FOSD (first order stochastic dominance) is pretty much non-stochastic. Why does it have a "stochastic" in its name?
281 views

183 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 ($\cdotp$, $\cdotp$)....
263 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 ...
158 views

### Derivative of CARA utility

Can someone help explain the passage here? I'm rusty with my linear algebra so the derivate of these transpose matrices isn't making any sense to me. A detailed explanation would be very much ...
71 views

### Short call in binomial option pricing model

I am pretty new at this, so my apologies in advance if the question is too out of place. I have been reading about portfolio replication models, and stumbled upon this example that I don't quite ...
21 views

### Estimated betas and optimal portfolio

I ran a regression on 20 assets to estimate their beta with different methods. I would like to see the differences of these estimation differences in terms of mean-variance optimal portfolio. How can ...
84 views

### How to calculate standard deviation of a portfolio?

So i have this information: Suppose that 60% of your portfolio is invested in Johnson & Johnson (JNJ) and the remainder is invested in Ford. You expect that over the coming year JNJ will give a ...
53 views

### How do economists model VNM-rationality violation?

This question concerns the need to generalise utility maximisation, the fact that it's a special case of a general problem familiar to physicists, and the question of whether economists have affected ...
12 views

### 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....
124 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 ...
18 views

### Negative Risk Free Rate Sharpe Ratio

currently I am writing my Master-Thesis about SRI-Fonds. For analysing Sharpe Ratios from different Fonds I need to use the risk free rate (e.g. Euribor 3M). Unfortunately I can‘t find anything about ...
50 views

### log returns in finance

Why are log returns used in finance? For example to calculate a stocks performance. There are a lot of articles on that topic yet I don't find them very helpful. Could somebody please explain step by ...
97 views

### Flat Term Structure and Immunized Portfolio Strategy

The current term structure is flat at 2%. You have a liability of \$500,000 per year for the next five years. You decide to form an immunized portfolio. a) Describe your exact strategy if you ...