This tutorial written and reproduced with permission from Peter Ponzo We want to consider the possibility of generating random returns with prescribed parameters … such as correlation. When one talks about the correlation between stock A and stock B, one usually means the Pearson correlation which would give, for example: […]
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This tutorial written and reproduced with permission from Peter Ponzo We’re attaching a personal “Utility” to the prospect of receiving $x, namely U(x). For example, we might choose the Utility Function U(x) = SQRT(x) so that we attach to a gain of $10,000 a “Utility” of SQRT(10,000) = 100 and […]
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This tutorial written and reproduced with permission from Peter Ponzo One often attempts to find some optimal strategy by varying certain parameters. Perhaps the problem is to find the optimal allocation of assets between stocks and bonds, given the Mean and Volatility of each asset. Perhaps it’s to decide the […]
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This tutorial written and reproduced with permission from Peter Ponzo Once upon a time, in 1952, Harry Markowitz introduced “Modern Portfolio Theory” and the “Mean-Variance optimization” and … Figure 1 Huh? You pick a “risk” which you’re comfortable with (they equate Risk = Standard Deviation), then vary your […]
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If you have reviewed the systems that we offer for sale you will find that these systems tend to have a high percentage of winning trades. This is no accident. Although it is not essential for a system to have a high winning percentage in order to make money, there […]
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