Portfolio risk in multiple frequencies

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Torun M. U., Akansu A. N., Avellaneda M.

IEEE Signal Processing Magazine, vol.28, no.5, pp.61-71, 2011 (SCI-Expanded) identifier identifier

  • Publication Type: Article / Article
  • Volume: 28 Issue: 5
  • Publication Date: 2011
  • Doi Number: 10.1109/msp.2011.941552
  • Journal Name: IEEE Signal Processing Magazine
  • Journal Indexes: Science Citation Index Expanded (SCI-EXPANDED), Scopus
  • Page Numbers: pp.61-71
  • Dokuz Eylül University Affiliated: Yes

Abstract

Portfolio risk, introduced by Markowitz in 1952 and defined as the standard deviation of the portfolio return, is an important metric in the modern portfolio theory (MPT). A popular method for portfolio selection is to manage the risk and return of a portfolio according to the cross-correlations of returns for various financial assets. In a real-world scenario, estimated empirical financial correlation matrix contains significant level of intrinsic noise that needs to be filtered prior to risk calculations. © 2011 IEEE.