Mean-Variance Optimization and the Total Portfolio Approach
Free CAIA Level II lesson in Asset Allocation. 41 min read, ~6,108 words.
MVO maximizes mean-variance utility; concave utility means risk averse, linear means risk neutral, and is the risk-aversion coefficient. Risk aversion can be recovered from a chosen portfolio via. Closed-form weights scale inversely with; for one risky asset, and a positive liability covariance adds. Unconstrained MVO produces shorts, weights above 100...
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Check Your Understanding
- Exam Shortcuts
Learning objectives
- mvo process
- mvo implementation
- mvo multiple risky
- mvo issues
- mvo adjustments
- mvo estimation error
- tpa overview
- tpa defining
- tpa governance
- tpa factor lens
- tpa competition capital
- tpa culture
- tpa implementing
- core satellite
- top down bottom up
- risk budgeting
- factor risk budgeting
- risk parity
- other quant strategies
- taa
- taa process
- cash commitments illiquidity
- liquid alternatives
- lp direct investment
- co investments
- co investment returns
- secondary market pe
- gp led secondaries
- rebal buy hold constant mix
- rebal directional
- rebal cppi
- rebal obpi
- rebal dynamic illiquid
- rebal costs
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