Portfolio Management

Question 1

♦PMGMT♦ Value at Risk (VAR)

Answer 1

Minimum loss with a given %

Question 2

♦PMGMT♦ Parametric VAR

Answer 2

Assumes normal distribution

5% annual VAR = (avg - 1.65 * std dev) * port value

1% … = … 2.33 …

Daily VAR = EReturn / 250 and std dev / √250

Question 3

♦PMGMT♦ Historical VAR

Answer 3

Assumes future dist will be similar to past dist How to: Order port a gets the percentile

Question 4

♦PMGMT♦ Monte Carlo Simulation VAR

Answer 4

Not constrained to any dist Computer simulation

Question 5

♦PMGMT♦ Extensions of VAR

Answer 5

Conditional VAR = expected shortfall - exp loss given that you have passed the VAR threshold Incremental VAR = mudança no VAR do port pela mudança de x% em um ativo. Definido pela recalculação de todo o portfolio. Marginal VAR = Parecido com o IVAR, mas pelo slope. Apenas uma aproximação. Relative VAR = Dif do VAR do port com o benchmark

Question 6

♦PMGMT♦ Marginal utility e Yields

Answer 6

M = Mu future / Mu today sempre < 1, já que sempre prefiro consumir hoje Inversamente proporcional ao rf - se M é baixo, o rf tem que ser muito alto para quererem investir ao inves de consumir. Alta exp de riqueza no futuro significa maior I por ter menor M. Yield é impactado por M + exp inflação + incerteza na inflação + Risco de crédito + Equity risk premium + Falta de Liquidez

Question 7

♦PMGMT♦ Sharpe Ratio

Answer 7

Rp - Rf / std dev port (unaffected by cash or lev)

Question 8

♦PMGMT♦ Information Ratio

Answer 8

IR = Rp - Rb / std p - std benchmark (affected by cash and lev, but unaffected by aggressiveness in weights) SEMPRE ESCOLHER PELO IR, mesmo que tenha que compor com o benchmark para adquar o risco

Question 9

♦PMGMT♦ Sharpe Ratio (portfolio)

Answer 9

SRp = SRbench ² + IR ²

Question 10

♦PMGMT♦ Information Coefficient (IC)

Answer 10

Forecasting ability Correl ( forecasted return, actual return) IC = 2 * (% correct) - 1

Question 11

♦PMGMT♦ Transfer Coefficient (TC)

Answer 11

Ideas into action Correl ( forecasted return, weights) If = 1, what you think is put in place / unconstrained

Question 12

♦PMGMT♦ Breath (BR)

Answer 12

of independent active bets during the year

Question 13

♦PMGMT♦ Full fundamental law and basic fundamental law

Answer 13

ERa = TC * IC * √BR * std dev a IR = TC * IC * √BR Basic fundamental law assumes TC = 1

Question 14

♦PMGMT♦ Optimal active risk

Answer 14

Std A = IR / SRb * Std benchmark