Data processing: financial – business practice – management – or co – Automated electrical financial or business practice or... – Finance
Reexamination Certificate
2008-07-15
2008-07-15
Diaz, Susanna M (Department: 3692)
Data processing: financial, business practice, management, or co
Automated electrical financial or business practice or...
Finance
Reexamination Certificate
active
07401041
ABSTRACT:
Robust methods for determining an investment portfolio are based on investment parameters which are assumed to be error bounded rather than precisely known values. A confidence threshold is input based on the measure of confidence in the resulting worst-case portfolio performance that is desired by an investor. Using historical return data, a nominal value for the mean return for each asset, a nominal factor loading vector for each asset and a nominal factor covariance matrix are determined. Uncertainty sets, which define the region within which a parameter is statistically expected to reside are defined for the mean return vector, factor loading matrix and factor covariance matrix. The uncertainty sets are then applied to a robust investment problem of interest, based on investment objectives, such that the worst case market parameters reside within the applied uncertainty sets with a probability set by the selected confidence threshold. Preferably, the uncertainty sets are defined in a manner which enables the robust investment problem of interest to be expressed in the form of a second-order cone problem, which is readily solvable by a number of known techniques.
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Goldfarb Donald
Iyengar Garud
Baker & Botts LLP
Diaz Susanna M
The Trustees of Columbia University
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