Portfolio Management Software
This tutorial written and reproduced with permission from Peter Ponzo I’ve never been enthusiastic about the common assumptions that stock returns are distributed normally or lognormally or … whatever. For example, the normal and lognormal distributions look like Figure 1a. The normal density distribution is described by: [1] […]
This tutorial written and reproduced with permission from Peter Ponzo Historical Volatility (HV) is calculated by looking at historical returns and calculating some kind of average deviation from their mean value using the magic formula for Standard Deviation … also called Volatility. But aren’t their several magic formulas for Standard […]
This tutorial written and reproduced with permission from Peter Ponzo You stare raptly at a collection of stock returns and ask: Are they distributed Normally or maybe Lognormally or may something else? Or, you’ve found some strange formula which generates random returns and you ask: Are they distributed Normally or […]
This tutorial written and reproduced with permission from Peter Ponzo We’re talking about generating joint distributions for two variables, say x and y, with prescribed properties. Just two? Pay attention! Before we run, we walk. For example, we introduced the 1-parameter family of Frank’s Copulas: [F1] where (for […]
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: […]