This paper presents an e cient method to compute portfolio risk and return. Two methodologies are exposed in evaluating portfolio perfor- mance by aggregation of securities returns: the rst one is based on local approximations of the compounding capitalization formula; in the alternative method, which properties are extremely useful within IAS-IFRS accounting principles, integral approximations of the amortized cost function are used. As for risk estimation, total portfolio tracking error is decomposed in summable factors directly related to benchmark asset class and portfolio weights.
Bramante, R., Dallago, G., An efficient method of evaluating portfolio risk and return, <<COMPUTATIONAL STATISTICS>>, 2013; 28 (3): 1351-1363. [doi:10.1007/s00180-012-0362-9] [http://hdl.handle.net/10807/28819]
An efficient method of evaluating portfolio risk and return
Bramante, Riccardo;
2012
Abstract
This paper presents an e cient method to compute portfolio risk and return. Two methodologies are exposed in evaluating portfolio perfor- mance by aggregation of securities returns: the rst one is based on local approximations of the compounding capitalization formula; in the alternative method, which properties are extremely useful within IAS-IFRS accounting principles, integral approximations of the amortized cost function are used. As for risk estimation, total portfolio tracking error is decomposed in summable factors directly related to benchmark asset class and portfolio weights.
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