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jcole21

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tT
发表于 2011-7-13 17:05 | 只看该作者

How the corner portfolios are determined ?

little, question, derived
I know it's a little bit strange to ask this question now.

But I just like to know how those corner portfolios in the text are determined (how to get those corner portfolios or how the corner portfolios are derived) ?
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NakedPuts2011

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发表于 2011-7-13 17:05 | 只看该作者
Linear relationship between 2 portfolios lying in the efficient frontier.
And u choose these PF depending on the expected return u want.

U have to do that as u cannot short the Risk free asset to buy more of the market PF having the highest Sharpe ratio



Edited 1 time(s). Last edit at Monday, June 20, 2011 at 11:14AM by Fridge.

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Valores

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3#
发表于 2011-7-13 17:05 | 只看该作者
When an asset goes from 0% to a postive %....or when an asset goes from a +% to 0%.

I think..it's been a while.

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nannan66

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4#
发表于 2011-7-13 17:05 | 只看该作者
What I meant is " how those corner portfolios are created (how can we get those corner portfolios ? "

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Roflnadal

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5#
发表于 2011-7-13 17:05 | 只看该作者
They are available portfolios and are the most efficient with a given level of risk/return they offer the best other variable (same exp return, lowest STD dev).

_____________________________________________________
-My friend QQQbbe, we will never forget you.

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skycfa

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6#
发表于 2011-7-13 17:05 | 只看该作者
It's tough to explain the whole process, but you can use solver in excel to run mean variance optimization to solve for asset class weights and determine these points based on your inputs of expected returns and standard deviation for each asset class.

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bpdulog

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7#
发表于 2011-7-13 17:05 | 只看该作者
the corner portfolios arise when you derive mean-variance efficient frontier with a constraint of no short sales.... so when you minimize variance at each level of return playing with weights (w=>0) the corner portfolios lie on the efficient frontier where one of the component assets changes it's weight from 0% to positive or vice versa

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thommo77

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8#
发表于 2011-7-13 17:05 | 只看该作者
the simplest way is to use solver, where u set the target cell at each level of return u need, and minimize the variance, changing the cells with weights

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Darien

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9#
发表于 2011-7-13 17:05 | 只看该作者
Another question. Are the 6 asset classes on P.252 of CFAI Text Vol 3 selected by the investor ? Or ?

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Windjammer

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10#
发表于 2011-7-13 17:05 | 只看该作者
yes...well kind of...they are the portfolios available to the investor. In theory, you would include all available portfolios/assets in the analysis.

In reality though, this exercise is more philosophical than practical. Deterministic, one period optimization is very constraining. And if you use historical sample stats, your optimal portfolio can look very strange. So oftentimes to get a realistic optimal portfolio, if you're going to do mean variance optimization, you have to choose a limited sample of available assets, or a set of assets already aggregated into portfolios/asset classes.

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