Cluster Risk Parity: Equalizing Risk Contributions Between and Within Asset Classes
The equal risk contribution (ERC) portfolio, introduced in Maillard et al.1, is a portfolio aiming to equalize the risk contributions from [its] different co...
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Volatility Forecasting: GARCH(1,1) Model
In the previous post of this series on volatility forecasting, I described the simple and the exponentially weighted moving average volatility forecasting m...
Random Portfolio Benchmarking: Simulation-based Performance Evaluation in Finance
As noted in Surz1, the question “Is [a mutual fund’s]2 performance good?” can only be answered relative to something1, typically by comparing that fund to a ...
Sparse Index Tracking: Limiting the Number of Assets in an Index Tracking Portfolio
In the previous post, I introduced the index tracking problem1, which consists in finding a portfolio that tracks as closely as possible2 a given financial ...
Beyond Modified Value-at-Risk: Application of Gaussian Mixtures to the Computation of Value-at-Risk
In a previous post, I described a parametric approach to computing Value-at-Risk (VaR) - called modified VaR12 - that adjusts Gaussian VaR for asymmetry and...