This course covers basic and advanced methods of portfolio construction and risk calculation, including theoretical foundations, statistical methodology, and numerical portfolio optimization techniques, such as
- Mean-Variance/Markowitz Portfolio Optimization with Constraints
- Introduction to NuOPT software for Portfolio Optimization
- Portfolio Uncertainty Calculation via Bootstrap Resampling
- Out-of-Sample Back Testing
- Expected Utility Maximization and Use of Alternative Risk Measures
- Components of Risk and Risk Budgeting
- Factor Models in Portfolio Construction and Analysis
- Active Management, Alphas, Information Ratios, Benchmark Tracking
- Performance Attribution
- Long-Short Portfolio Optimization
- Funds-of-Hedge Funds Portfolio Optimization and Risk Management
- Peformance Attribution
- Portfolio Optimization with Fat-Tailed Distributions
- Bayes Methods: Bayes-Stein and Black-Litterman
- Robust Statistics in Portfolio Construction
Modern Portfolio Optimization with NuOPT, S-PLUS and S+Bayes (2005), B. Scherer and D. Martin, Springer.
Modern Investment Management (2003), R. B. Litterman and the Quantitative Resources Group, Goldman Sachs Asset Management, Wiley.
Software:S-PLUS, S+NuOPT, and S+Bayes, included with Scherer and Martin (2005).
Prerequisites:Computational Finance and Financial Econometrics (ECON 424) or equivalent.
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