Portfolio OptimizationIDiscuss aspects of PO, including the Efficient Frontier, Capital Allocation Line, Modern Portfolio Theory and Portfolio Correlation.

IIDiscuss how LTCMs Portfolio Optimization went wrong, including the portfolios correlation factor.

IIIDiscuss Portfolio Optimization and some problems associated with it.

IVContrast a simpler alternative to more elaborate strategies while producing more consistent performance

I a

I a

http://www.creativewealthstrategies.com/Modern_Portfolio_Theory.doc

I b

I c

I c

The Efficient Frontier for S&P 100I dhttp://www.nag.co.uk/doc/TechRep/Pdf/tr2_00.pdf

I d

I ehttp://www.moneychimp.com/articles/valuation/capm.htm

I e

Efficient Frontier. I fhttp://en.wikipedia.org/wiki/File:Markowitz_frontier.jpg

I f

Portfolio Optimization with two assets Corporate Bond Treasury Risk-freeOptimal PortfolioII aValue at Risk, 3rd Ed.: The New Benchmark for Managing Financial Risk, Philippe Jorion, pps 557-563

II a

Portfolio OptimizationCapital Allocation LineThe Efficient FrontierII bCorporate Bond

Treasury Bond

Value at Risk, 3rd Ed.: The New Benchmark for Managing Financial Risk, Philippe Jorion, pps 557-563

II b

II cwww.indexfundeducator.com

II c

II dwww.indexfundeducator.com

II d

II ewww.indexfundeducator.com

II e

Risk and the Number of Securities

Risk (% pa)Number of SecuritiesII fValue at Risk, 3rd Ed.: The New Benchmark for Managing Financial Risk, Philippe Jorion, pps 557-563

II f

II gValue at Risk, 3rd Ed.: The New Benchmark for Managing Financial Risk, Philippe Jorion, pps 557-563

II g

default-rate volatility Moodys Investor Services, Alexandra Berthault II h

II h

III ahttp://www.travismorien.com/FAQ/portfolios/mptcriticism.htm

III a

IV a

IV b

Passive Investing Produces Better Returns Over Time

IV c

The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective. - Warren Buffetthttp://www.travismorien.com/FAQ/portfolios/mptcriticism.htm

IV d

To summarize:Optimum portfolio is where Efficient frontier meets the CAL

http://www.moneychimp.com/articles/valuation/capm.htm

Lessons learned from LTCMValue at Risk, 3rd Ed.: The New Benchmark for Managing Financial Risk, Philippe Jorion, pps 557-563

MPT Not Realistichttp://www.travismorien.com/FAQ/portfolios/mptcriticism.htm

Passive Investing Produces Better Returns Over Time

Thank you

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