Portfolio Construction

Read these first

1. 01The Tangency Portfolio and the Capital Market Line

   Once you can also hold cash, the whole efficient frontier collapses to a single best mix of risky assets plus a dial. That one mix is the tangency portfolio, and the straight line running through it is the capital market line.

2. 02The Merton Portfolio Problem

   If you can rebalance continuously and your appetite for risk does not change with how rich you are, the optimal fraction of your wealth to hold in a risky asset is a single constant, edge divided by risk aversion times variance, no matter your horizon or your bank balance.

3. 03Transaction-Cost-Aware Portfolio Optimization

   The best portfolio to hold and the best portfolio to trade into are different things. Putting trading costs inside the optimizer, rather than subtracting them afterwards, produces a no-trade region and a partial-adjustment rule instead of a chase.

Then the rest

1. 04MPT (Harry Markowitz)
2. 05The Efficient Frontier
3. 06The Capital Asset Pricing Model (CAPM)
4. 07Pitfalls of Mean-Variance Optimization
5. 08Covariance Matrix Estimation
6. 09Shrinkage
7. 10Ledoit-Wolf Covariance Shrinkage
8. 11The Black-Litterman Model
9. 12Risk Parity
10. 13Hierarchical Risk Parity (López de Prado)
11. 14Factor Risk Models
12. 15The Kelly Criterion
13. 16Position Sizing
14. 17Vol Targeting
15. 18Value at Risk (VaR)
16. 19Expected Shortfall (CVaR)
17. 20Coherent Risk Measures
18. 21Portfolio Capacity
19. 22Diversification
20. 23Leverage and Margin
21. 24The Risk-Return Tradeoff
22. 25Correlation Clustering
23. 26Equal Weighted vs Market Cap Weighted
24. 27Information Coefficient
25. 28Jensen's Alpha
26. 29Minimum-Variance Portfolio
27. 30Short-Sale Constraints in Portfolio Optimization
28. 31Stress Testing and Scenario Analysis
29. 32Tracking Error
30. 33Treynor Ratio
31. 34Turnover and Rebalancing
32. 35Two-Fund Separation
33. 36Utility Functions and Risk Aversion
34. 37Cardinality and Sparsity Constraints
35. 38CPPI and Portfolio Insurance
36. 39Drawdown Control
37. 40Entropy Pooling and View Blending
38. 41Marginal Contribution to Risk
39. 42Maximum-Diversification Portfolio
40. 43Mean-CVaR Optimization
41. 44Multi-Period Portfolio Choice
42. 45Nested Clustered Optimization
43. 46Omega Ratio
44. 47Random Matrix Theory in Finance
45. 48Resampled Efficiency
46. 49Risk Budgeting
47. 50Robust Portfolio Optimization
48. 51Tail-Risk Hedging