I'm not sure if this is the appropriate site to pose this, and if its not I'm open to suggestions of sites where I could directed it.
The problem below I thought at first this would be a fairly simple, but it turns out to be a lot more complicated than I first imagined. I was good at maths at school, but that was 20 years ago and after attempting this I've realized it is beyond my scope..
I have 3 known inputs, LongStdDev, ShortStdev and MarketStdev. And I have two targeted inputs, PortfolioBeta and PortfolioStdev.
I only have two variables, LongWeight and ShortWeight.
PortfolioBeta = LongWeight - ShortWeight
PortfolioStdev = Sqrt((LongWeight*LongStdev)^2 + (ShortWeight*ShortStdev)^2 +
(abs(LongWeight-ShortWeight)*MarketStdev…
From these two formulas and five inputs is it possible to calculate the LongWeight (and by Inference the ShortWeight)? Trying to use what I remember from high school maths I hit a wall when I try to substitute {PortfolioBeta-LongWeight} for {ShortWeight} and then square it.
The problem below I thought at first this would be a fairly simple, but it turns out to be a lot more complicated than I first imagined. I was good at maths at school, but that was 20 years ago and after attempting this I've realized it is beyond my scope..
I have 3 known inputs, LongStdDev, ShortStdev and MarketStdev. And I have two targeted inputs, PortfolioBeta and PortfolioStdev.
I only have two variables, LongWeight and ShortWeight.
PortfolioBeta = LongWeight - ShortWeight
PortfolioStdev = Sqrt((LongWeight*LongStdev)^2 + (ShortWeight*ShortStdev)^2 +
(abs(LongWeight-ShortWeight)*MarketStdev…
From these two formulas and five inputs is it possible to calculate the LongWeight (and by Inference the ShortWeight)? Trying to use what I remember from high school maths I hit a wall when I try to substitute {PortfolioBeta-LongWeight} for {ShortWeight} and then square it.
-
PortfolioBeta = LongWeight - ShortWeight
LongWeight = beta - short weight
PortfolioStdev = Sqrt(((beta - short weight)*LongStdev)^2 + (ShortWeight*ShortStdev)^2 +
(abs(beta)*MarketStdev)
now you have a formula with only one variable!
square both sides, plug the numbers that you know,
you will eventually get to:
A ShortWeight^2 + B SortWeigth + C = 0
Jam that into the quadratic formula Sw = ( -B +- sqrt(B^2 - 4AC))/2A
LongWeight = beta - short weight
PortfolioStdev = Sqrt(((beta - short weight)*LongStdev)^2 + (ShortWeight*ShortStdev)^2 +
(abs(beta)*MarketStdev)
now you have a formula with only one variable!
square both sides, plug the numbers that you know,
you will eventually get to:
A ShortWeight^2 + B SortWeigth + C = 0
Jam that into the quadratic formula Sw = ( -B +- sqrt(B^2 - 4AC))/2A