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    mathematics are the twin languages of algorithmic trading. Readers will fi nd this book involves somewhat more mathematics than my previous one. This is because of my desire to inject more precision in discussing the concepts involved in fi nancial markets, and also because I believe using simple mathematical models for trading can be more advantageous than using the usual “data-mining” approach. That is to say, instead of throwing as many technical tradingmathematics are the twin languages of a

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    mathematics are the twin languages of algorithmic trading. Readers will fi nd this book involves somewhat more mathematics than my previous one. This is because of my desire to inject more precision in discussing the concepts involved in fi nancial markets, and also because I believe using simple mathematical models for trading can be more advantageous than using the usual “data-mining” approach. That is to say, instead of throwing as many technical tradingmathematics are the twin languages of a

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    7 views8 pages

    MIT18 S096F13 ETF Pridb 30

    Uploaded by

    Theo
    mathematics are the twin languages of algorithmic trading. Readers will fi nd this book involves somewhat more mathematics than my previous one. This is because of my desire to inject more precision in discussing the concepts involved in fi nancial markets, and also because I believe using simple mathematical models for trading can be more advantageous than using the usual “data-mining” approach. That is to say, instead of throwing as many technical tradingmathematics are the twin languages of a

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 8

    Sector ETFS (Period: 2003−2006)

    MATERIALS(XLB)
    1.0

    HEALTH CARE(XLV)
    CONSSTAPLES(XLP)
    CONSDISC(XLY)
    ENERGY(XLE)
    FINANCIAL(XLF)
    INDUSTRIALS(XLI)
    TECHNOLOGY(XLK)
    0.8

    UTILITIES(XLU)
    riskfree
    0.6
    0.4
    0.2
    0.0

    0 50 100 150 200

    Time
    1. Risk vs Return (Annualized)
    Sector ETFS (Period: 2003−2006)
    ENERGY(XLE)
    ●
    0.25
    0.20

    UTILITIES(XLU)
    ●

    MATERIALS(XLB)
    ●
    0.15

    INDUSTRIALS(XLI)
    FINANCIAL(XLF)
    ●●
    CONSDISC(XLY)
    ●
    Return

    TECHNOLOGY(XLK)
    ●
    0.10

    CONSSTAPLES(XLP)
    ●
    HEALTH CARE(XLV)
    ●
    0.05
    0.00

    riskfree
    ●

    0.00 0.05 0.10 0.15 0.20

    Volatility
    2. Optimal Allocations by Target Return Index
    1.0 Sector ETFS (Period: 2003−2006)

    MATERIALS(XLB)
    HEALTH CARE(XLV)
    CONSSTAPLES(XLP)
    CONSDISC(XLY)
    ENERGY(XLE)
    0.8

    FINANCIAL(XLF)
    INDUSTRIALS(XLI)
    TECHNOLOGY(XLK)
    UTILITIES(XLU)
    riskfree
    0.6
    0.4
    0.2
    0.0

    0 20 40 60 80 100

    Target Return Index


    3. Optimal Allocations by Target Return Index
    1.0 Sector ETFS (Period: 2003−2006)

    riskfree
    UTILITIES(XLU)
    TECHNOLOGY(XLK)
    INDUSTRIALS(XLI)
    FINANCIAL(XLF)
    0.8

    ENERGY(XLE)
    CONSDISC(XLY)
    CONSSTAPLES(XLP)
    HEALTH CARE(XLV)
    MATERIALS(XLB)
    0.6
    0.4
    0.2
    0.0

    Target Return Index


    4. Risk vs Return (Annualized)
    Sector ETFS (Period: 2003−2006)
    Efficient Frontier
    ENERGY(XLE)
    ●
    0.25
    0.20

    UTILITIES(XLU)
    ●

    MATERIALS(XLB)
    ●
    0.15

    INDUSTRIALS(XLI)
    FINANCIAL(XLF)
    ●●
    Return (Ann.)

    CONSDISC(XLY)
    ●

    TECHNOLOGY(XLK)
    ●
    0.10

    CONSSTAPLES(XLP)
    ●
    HEALTH CARE(XLV)
    ●
    0.05
    0.00

    riskfree
    ●

    0.00 0.05 0.10 0.15 0.20

    Risk (Ann. Volatility)


    5. Risk vs Return (Annualized)
    Sector ETFS (Period: 2003−2006)
    Efficient Frontier and Target Portfolio
    ENERGY(XLE)
    ●
    0.25
    0.20

    UTILITIES(XLU)
    ●

    O MATERIALS(XLB)
    ●
    0.15

    INDUSTRIALS(XLI)
    FINANCIAL(XLF)
    ●●
    Return (Ann.)

    CONSDISC(XLY)
    ●

    TECHNOLOGY(XLK)
    ●
    0.10

    CONSSTAPLES(XLP)
    ●
    HEALTH CARE(XLV)
    ●
    0.05
    0.00

    riskfree
    ●

    0.00 0.05 0.10 0.15 0.20

    Risk (Ann. Volatility)


    6. Sector ETFS (Period: 2003−2006)
    Opt. Portfolio (Target−Vol 10 Pct)

    MATERIALS(XLB)
    1.0

    HEALTH CARE(XLV)
    CONSSTAPLES(XLP)
    CONSDISC(XLY)
    ENERGY(XLE)
    FINANCIAL(XLF)
    INDUSTRIALS(XLI)
    TECHNOLOGY(XLK)
    0.8

    UTILITIES(XLU)
    riskfree
    0.6
    0.4
    0.2
    0.0

    0 50 100 150 200

    Time
    MIT OpenCourseWare
    http://ocw.mit.edu

    18.S096 Topics in Mathematics with Applications in Finance


    Fall 2013

    For information about citing these materials or our Terms of Use, visit: http://ocw.mit.edu/terms.

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