solver examples?

[03Jane]

I am posting my (flawed) example for the Hewlitt case, but if someone else has an example that works, please post yours!
I am able to calculate the volatility and mean, but when I run the solver with no constraints it fails to optimize.

 

The only constraints that I have is that the sum of the investment categories is 100% and the mean should be 7.75% for less,

My goal is to minimize volatility.

Any advice or exmples of other set-ups would be helpful.

thanks!
Jane

[Gabriel Bowers]

I'm attaching my model along with a screenshot with the solver.  I think it worked well.

I won't have time right now to answer any questions regarding it but I think it should be self-explanatory.

Gabriel

[03Jane]

Thanks for sending the example-  I was able to find a few algebra errors in mine.

But I still don't see how you get the professor's answer from class, with no constraints...

Here is a summary from my solver:

 

	George's solution		proposed		mine
	7%		21.0%		21.2%
	13%		20.0%		16.9%
	5%		7.0%		-8.9%
	13%		10.0%		-1.2%
	4%		12.0%		7.0%
	38%		20.0%		53.6%
	45%		12.0%		29.6%
	69%		13.0%		83.9%
	18%		5.0%		42.9%
	-112%		-20.0%		-145.1%
mean	7.86%		7.75%		7.75%
volatility	12.6%		13.1%		11.0%
sharpe	0.62		0.59		0.71

 

[Gabriel Bowers]

The problem that he explained last night is that the solver will not easily go to this example.

To get to that solution, you probably have to first find the frontier that exists without any leverage.  

The sharpe ratio determines the slope from 0% E(R) to the 7.75% E(R).  You would then need to figure out where that slope intercepts the frontier and realize that adding leverage from that point on the frontier will adjust your mean-variance (up and to the right) relative to the Sharpe ratio (slope).  You would add leverage until you reach 7.75% and 13.1% volatility.

This would be easier with a white board...  :-) 

[03Jane]

Ah, I think that made sense. I'll go try it out. Thanks for your help!

[Shashank Saggar]

All,

The next assignment is due on Wednesday, April 20th and I wanted to find out if we can get together for a quick working session Sunday morning 10 AM PST to discuss the questions.

Does this time work for everyone?

Shashank

[Gabriel Bowers]

I am taking a 1-credit class that is happening this weekend.

I could meet earlier on Saturday (~10am?).

[Shashank Saggar]

Saturday works for me - can we make it ~11:30 am instead? 

Are there any others who can make it at this time? 

[alex smirnov]

I can make it at 11:30am.  won't be able to make it earlier

[Gabriel Bowers]

Sure.  I can do that.

[Shashank Saggar]

Great - lets use the webmeeting info below:

To join the meeting:

http://my.adobe.acrobat.com/shashank_saggar/

Meeting ID: 6309463

Password: 87654321

Toll-Free(US & Canada): 877-220-5439

Shashank

[Gabriel Bowers]

Actually...can we meet at the school?  

[Shashank Saggar]

I am on the east coast over the weekend and won't be able to. If there are others who want to meet and join the webmeeting they are more than welcome.

Shashank

[alex smirnov]

i'm fine with meting at school.  I reserved this:

Date: Saturday, April 16, 2011
Time: 11:30 AM to 1:30 PM (2 hours)

Room: LH 300G

[pn]

I am not sure I will have the reading done....But will join in either over the phone or at school..

Padma

[Suraj Ayinikat]

Sat morn might be too early for me.

Difficult to get the reading done. 

Anyone keen on a Sunday meeting?

Suraj Ayinikatt

[shashank saggar]

All,

I am on the road and will run 30 minutes late.

Shashank

[alex smirnov]

I did my own version of the excel spreadsheet for Hewitt.  With 7.75% return, I get 11.14% volatility.  My allocations are 

18.74% D. Equities

11.16% F. Equity

0.00% E.M. Equity

0.00% Private Equity

6.71% Real Assets

48.83% Absolute Return

34.43% D. Bonds

82.75% TIPS

36.47% High Yield

-139.08% Cash

anybody got the same answers (unconstrained).  Just trying to figure out if I did the math right