Exercises in Advanced Risk and Portfolio Management - With Step-by-Step Solutions and Fully Documented Code

Abstract:     
Exercises and case studies for a rigorous approach to risk- and portfolio-management. This booklet stems from the review sessions of the six-day ARPM bootcamp.

Contents include:
Advanced multivariate statistics; copula-marginal decomposition
Annualization/projection (FFT, cumulants, simulations)
Pricing: exact; first order (delta/duration); second order (gamma/convexity)
Quest for invariance (stationarity, volatlity clustering, cointegration)
Mutlivariate estimation
- Non-parametric; MLE; shrinkage; robust; Bayesian; missing data
- Generalized hypothesis testing
Dimension reduction
- Statistical (random matrices; principal components; factor analysis)
- Cross-sectional / time-series factor models
- Factors on Demand
Risk management
- VaR/CVaR (marginal Euler decomposition; extreme value theory; Cornish-Fisher; elliptical)
- Generalized objectives (p&l, return, relative return, etc)
- Stochastic dominance/utility theory
Classical portfolio management: mean-variance
Dynamic strategies (option replication, CPPI, utlity maximization)
Advanced portfolio management
- Robust optimization
- Black-Litterman and beyond: fully flexible views
Solution code available at MATLAB Central File Exchange.

Number of Pages in PDF File: 111

Keywords: multivariate statistics, invariance quest, estimation theory, factor models, dimension reduction, pricing, VaR, CVaR, robust optimization, estimation risk, copula, cointegration, shrinkage, robustness, Bayesian, Black-Litterman, dynamic strategies

JEL Classification: C1, G11

working papers series