Optimal portfolio selection under Expected Shortfall optimisation with Random Matrix Theory denoising
| Autor: | Mgr. Jan Šíla |
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| Rok: | 2018 - zimní |
| Vedoucí: | |
| Konzultant: | |
| Typ práce: | Diplomová Finance, finanční trhy a bankovnictví |
| Jazyk: | Anglicky |
| Stránky: | 80 |
| Ocenění: | |
| Odkaz: | https://is.cuni.cz/webapps/zzp/detail/188605/ |
| Abstrakt: | This thesis challenges several concepts in finance. Firstly, it is the Markowitz’s solution to the portfolio problem. It introduces a new method which denoises the covariance matrix – the cornerstone of the portfolio management. Random Matrix Theory originates in particle physics and was recently introduced to finance as the intersection between economics and natural sciences has widened over the past couple of years. Often discussed Efficient Market Hypothesis is opposed by adopting the assumption, that financial returns are driven by Paretian distributions, instead of Gaussian ones, as conjured by Mandelbrot some 50 years ago. The portfolio selection is set in a framework, where Expected Shortfall replaces the standard deviation as the risk measure. Therefore, direct optimisation of the portfolio is implemented to be compared with the performance of the classical solution and its denoised counterpart. The results are evaluated in a controlled environment of Monte Carlo simulation as well as using empirical data from S&P 500 constituents. |
