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by Dessislava A. Pachamanova, Frank J. Fabozzi
Portfolio Construction and Analytics
The Frank J. Fabozzi Series
Title Page
Copyright
Dedication
Preface
Central Themes
Software
Teaching
Disclosure
About the Authors
Acknowledgments
Chapter 1: Introduction to Portfolio Management and Analytics
1.1 Asset Classes and the Asset Allocation Decision
1.2 The Portfolio Management Process
1.3 Traditional versus Quantitative Asset Management
1.4 Overview of Portfolio Analytics
1.5 Outline of Topics Covered in the Book
Part One: Statistical Models of Risk and Uncertainty
Chapter 2: Random Variables, Probability Distributions, and Important Statistical Concepts
2.1 What Is a Probability Distribution?
2.2 The Bernoulli Probability Distribution and Probability Mass Functions
2.3 The Binomial Probability Distribution and Discrete Distributions
2.4 The Normal Distribution and Probability Density Functions
2.5 The Concept of Cumulative Probability
2.6 Describing Distributions
2.7 Dependence between Two Random Variables: Covariance and Correlation
2.8 Sums of Random Variables
2.9 Joint Probability Distributions and Conditional Probability
2.10 Copulas
2.11 From Probability Theory to Statistical Measurement: Probability Distributions and Sampling
Chapter 3: Important Probability Distributions
3.1 Examples of Probability Distributions
3.2 Modeling Financial Return Distributions
3.3 Modeling Tails of Financial Return Distributions
Chapter 4: Statistical Estimation Models
4.1 Commonly Used Return Estimation Models
4.2 Regression Analysis
4.3 Factor Analysis
4.4 Principal Components Analysis
4.5 Autoregressive Conditional Heteroscedastic Models
Part Two: Simulation and Optimization Modeling
Chapter 5: Simulation Modeling
5.1 Monte Carlo Simulation: A Simple Example
5.2 Why Use Simulation?
5.3 How Many Scenarios?
5.4 Random Number Generation
Chapter 6: Optimization Modeling
6.1 Optimization Formulations
6.2 Important Types of Optimization Problems
6.3 A Simple Optimization Problem Formulation Example: Portfolio Allocation
6.4 Optimization Algorithms
6.5 Optimization Software
6.6 A Software Implementation Example
Chapter 7: Optimization under Uncertainty
7.1 Dynamic Programming
7.2 Stochastic Programming
7.3 Robust Optimization
Part Three: Three Portfolio Theory
Chapter 8: Asset Diversification
8.1 The Case for Diversification
8.2 The Classical Mean-Variance Optimization Framework
8.3 Efficient Frontiers
8.4 Alternative Formulations of the Classical Mean-Variance Optimization Problem
8.5 The Capital Market Line
8.6 Expected Utility Theory
8.7 Diversification Redefined
Chapter 9: Factor Models
9.1 Factor Models in the Financial Economics Literature
9.2 Mean-Variance Optimization with Factor Models
9.3 Factor Selection in Practice
9.4 Factor Models for Alpha Construction
9.5 Factor Models for Risk Estimation
9.6 Data Management and Quality Issues
9.7 Risk Decomposition, Risk Attribution, and Performance Attribution
9.8 Factor Investing
Chapter 10: Benchmarks and the Use of Tracking Error in Portfolio Construction
10.1 Tracking Error versus Alpha: Calculation and Interpretation
10.2 Forward-Looking versus Backward-Looking Tracking Error
10.3 Tracking Error and Information Ratio
10.4 Predicted Tracking Error Calculation
10.5 Benchmarks and Indexes
10.6 Smart Beta Investing
Part Four: Equity Portfolio Management
Chapter 11: Advances in Quantitative Equity Portfolio Management
11.1 Portfolio Constraints Commonly Used in Practice
11.2 Portfolio Optimization with Tail Risk Measures
11.3 Incorporating Transaction Costs
11.4 Multiaccount Optimization
11.5 Incorporating Taxes
11.6 Robust Parameter Estimation
11.7 Portfolio Resampling
11.8 Robust Portfolio Optimization
Chapter 12: Factor-Based Equity Portfolio Construction and Performance Evaluation
12.1 Equity Factors Used in Practice
12.2 Stock Screens
12.3 Portfolio Selection
12.4 Risk Decomposition
12.5 Stress Testing
12.6 Portfolio Performance Evaluation
12.7 Risk Forecasts and Simulation
Part Five: Fixed Income Portfolio Management
Chapter 13: Fundamentals of Fixed Income Portfolio Management
13.1 Fixed Income Instruments and Major Sectors of the Bond Market
13.2 Features of Fixed Income Securities
13.3 Major Risks Associated with Investing in Bonds
13.4 Fixed Income Analytics
13.5 The Spectrum of Fixed Income Portfolio Strategies
13.6 Value-Added Fixed Income Strategies
Chapter 14: Factor-Based Fixed Income Portfolio Construction and Evaluation
14.1 Fixed Income Factors Used in Practice
14.2 Portfolio Selection
14.3 Risk Decomposition
Chapter 15: Constructing Liability-Driven Portfolios
15.1 Risks Associated with Liabilities
15.2 Liability-Driven Strategies of Life Insurance Companies
15.3 Liability-Driven Strategies of Defined Benefit Pension Funds
Part Six: Derivatives and Their Application to Portfolio Management
Chapter 16: Basics of Financial Derivatives
16.1 Overview of the Use of Derivatives in Portfolio Management
16.2 Forward and Futures Contracts
16.3 Options
16.4 Swaps
Chapter 17: Using Derivatives in Equity Portfolio Management
17.1 Stock Index Futures and Portfolio Management Applications
17.2 Equity Options and Portfolio Management Applications
17.3 Equity Swaps
Chapter 18: Using Derivatives in Fixed Income Portfolio Management
18.1 Controlling Interest Rate Risk Using Treasury Futures
18.2 Controlling Interest Rate Risk Using Treasury Futures Options
18.3 Controlling Interest Rate Risk Using Interest Rate Swaps
18.4 Controlling Credit Risk with Credit Default Swaps
Appendix: Basic Linear Algebra Concepts
A.1 Systems of Equations
A.2 Vectors and Matrices
A.3 Matrix Algebra
A.4 Important Definitions
References
Index
End User License Agreement
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The Frank J. Fabozzi Series
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Copyright
Portfolio
Construction
and Analytics
DESSISLAVA A. PACHAMANOVA
FRANK J. FABOZZI
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