Portfolio Optimization

Portfolio Optimization Lecture

$r=w^\prime r$ and $\sigma^2 = w^\prime \Sigma w$

Constrained Optimization

  • Objective
  • Constraints
    • Leverage
    • Concentration
    • Tracking Error
  • Challenges
    • Relative returns
    • Covariance Matrix

Kelly Criterion

$K=p-\frac{(1-p)}{r}$

  • Betting Odds vs Returns
  • Assumptions

Risk Parity Portfolios

Example on GitHub

  • Challenges
    • Leverage
    • Asset Class Correlations
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