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