Statistics 19: Fiat Lux Seminar
Statistics and Portfolio Risk Management with Stock Market Applications

Announcements

First class is on Monday, 27 September
Location: De Neve Plaza Commons Building P349
Day/time: M 16:00 - 16:50
See you then!

  • For the course syllabus click here.

    Useful links:

  • http://www.socr.ucla.edu


  • http://wiki.stat.ucla.edu/socr/index.php/SOCR_EduMaterials
  • Download R and packages.
  • Download RStudio.

    Handouts

  • 1. Introduction.
  • 1. Mean and variance of a linear combination of the returns of two stocks.
  • 2. Access and read data in R.
  • 3. Portfolio possibilities curve when risk free asset exist.
  • 4. How to find the point of tangency.
  • 5. An Analytic Derivation of the Efficient Portfolio Frontier (JFQA, Robert Merton, 1972).
  • 6. Simple regression.
  • 7. Adjusting the betas using Blume's technique.
  • 8. Options basics.
  • 9. Smiley faces - call option.
  • 10. Smiley faces - put option.
  • 11. Options - some simple examples.
  • 12. Payoff and profit for writer and buyer - call option.
  • 13. Payoff and profit for writer and buyer - put option.
  • 14. Lower and upper bounds for call and put options and put call parity.
  • 15. Trading strategies using options.

    Data

  • Week 2 data: Time plot for S&P500.
  • Week 3 data: S&P500 plus 5 stocks.
  • Week 4 data: S&P500 plus 26 stocks.

    Labs

  • 1. Week 3 - R commands: Compute the means and variance covariance matrix. Construct the frontier using two stocks.
  • 2. Week 4 - R commands: Compute the mean and variance of a ortfolio using matrix/vector operations.
  • 3. Week 5 - R commands: Draw the efficient frontier: When short sales are allowed the efficient frontier is the upper half of a hyperbola. Risk free asset exists: Tangent to the efficient frontier.
  • 4. Week 6 - R commands: Draw the efficient frontier using two portfolios on the efficient frontier.
  • 5. Week 8 - R commands: Single index model (SIM)
  • 5. Week 9 - R commands: Adjusting the betas - Blume method

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