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

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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

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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

Posted in almost wordless, Quant finance | Tagged , | 6 Comments