The Efficient Surface
For loss modelling purposes the efficient frontier is incomplete. We must include the total portfolio premium as an extra dimension.
The Efficient Frontier
Harry Markowitz revolutionised investment theory with the introduction of mean-variance analysis in a 1952 essay entitled ‘Portfolio Selecti
Portfolio Combinatorics
A portfolio manager (PM) seeks to adjust her portfolio's contract percent shares in order to obtain the minimum 1 in 200 year return per
Risk Measure?
TVaR, or not TVaR - that is the question; in the context of portfolio optimisation at least. The choice of risk measure to be minimised is of great importance as it has grave consequences on both the performance of potential optimisation algorithms and the ‘smoothness’ of the reduction in the tail. Risk is defined as the uncertainty (or volatility) of the portfolio rate of return. Volatility in the rate of return distribution translates to volatility in the underlying loss d