Portfolios - EDHEC-Risk
Portfolios - EDHEC-Risk
Portfolios - EDHEC-Risk
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Scientific Approaches: Towards the Efficient Frontier<br />
• Scientific diversification aims at reaching a high risk/return<br />
objective through portfolio construction techniques.<br />
• Two remarkable portfolios on the efficient frontier:<br />
– The MSR generates the highest reward per unit of portfolio<br />
volatility: needed optimization inputs are expected returns,<br />
correlations and volatilities.<br />
– The GMV generates the lowest possible portfolio volatility: needed<br />
optimization inputs are correlations and volatilities.<br />
• In what follows, we focus on these two approaches, and discuss<br />
some of the challenges involved in robust optimization.<br />
• Ad-hoc approaches can generally be regarded as specific cases<br />
under some particular assumptions.<br />
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