Stock Trading News

Scenario analysis (scenario planning) is an important tool for traders and portfolio managers. The ability to forecast multiple potential outcomes and weigh their probabilities is important for making informed decisions about asset allocation, risk management, and overall investment/trading strategy. This article will explore the concept of scenario analysis, its significance for financial professionals, and the […]

Risk management plays a critical role in ensuring the stability of financial institutions and mitigating potential losses. One essential tool for managing these risks is the risk measure. Risk measures are mathematical models used to quantify and manage the risks taken by banks, insurance companies, and other financial institutions. The aim is to determine the […]

In trading and investing, risk is always a factor. If you don’t take enough risk, you won’t make any money. If you take too much risk, it’ll be hard to keep any. But not all risks are equal. Understanding the concept of uncompensated risk is important for anyone looking to optimize their portfolio and maximize […]

Measuring performance is essential for assessing the effectiveness of a strategy and guiding future decisions. Two common methods used for this purpose are absolute return and relative return. Each approach provides distinct information about an investment or portfolio’s performance. Below we look into the differences between absolute return and relative return, discussing their respective definitions, […]

The Mutual Fund Separation Theorem (MFST) is a concept in portfolio theory that has impacted the way traders/investors approach portfolio construction and management. The theorem posits that under specific conditions, market participants can optimize their portfolios by investing in a select number of mutual funds and risk-free assets, rather than purchasing a larger number of […]

Derivatives have a long and complex history that traces back to ancient civilizations. These financial instruments have evolved significantly over time and have become an important tool for managing risk, hedging investments, and even speculating on market movements. We’ll take a look at the evolution of derivatives from ancient cultures to the modern era, highlighting […]

In finance and investment, one popular approach is the benchmark-driven investment strategy. This method involves tying the target return of an investment portfolio to a specific index or a combination of indices within a sector, such as the S&P 500. The ultimate goal for fund managers is to outperform the chosen benchmark and generate higher […]

Portfolio management is an essential aspect of the finance and investment world, which involves the strategic allocation of assets to optimize risk and return. A key area of focus in this discipline is the optimization of dedicated portfolios. (We wrote about dedicated portfolio theory here.) These portfolios are specifically designed to generate a predictable stream […]

In trading and investment management, numerous theories and strategies have been developed to help traders/investors achieve their financial goals. One such strategy is the Dedicated Portfolio Theory (DPT), which focuses on creating investment portfolios specifically designed to meet predetermined future cash flow needs. In this article, we’ll discuss the applications, examples, advantages, and disadvantages of […]

Copulas have become a valuable tool in the field of quantitative finance, particularly in the areas of trading, investing, portfolio management, and risk management. They are widely used to model and minimize tail risk, as well as in portfolio optimization applications. This article explores the various ways in which copulas are utilized in financial markets […]