Range-Based Volatility Estimators: Overview and Examples of Usage
Volatility estimation and forecasting plays a crucial role in many areas of finance. For example, standard risk-based portfolio allocation methods (minimum ...
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Correlation Matrix Stress Testing: Random Perturbations of a Correlation Matrix
In the previous posts of this series, I detailed a methodology to perform stress tests on a correlation matrix by linearly shrinking a baseline correlation m...
Managing Missing Asset Returns in Portfolio Analysis and Optimization: Backfilling through Residuals Recycling
In a multi-asset portfolio, it is usual that some assets have shorter return histories than others1. Problem is, the presence of assets whose return histori...
Simulation from a Multivariate Normal Distribution with Exact Sample Mean Vector and Sample Covariance Matrix
In the research report Random rotations and multivariate normal simulation1, Robert Wedderburn introduced an algorithm to simulate i.i.d. samples from a mu...
The Bogle Model for Bonds: Predicting the Returns of Constant Maturity Government Bond ETFs
In his original 1991 article Investing in the 1990s1, John Bogle described a simple model to help investors setting reasonable expectations for long-term U.S...