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