what do you guys think about this one? white paper: Multi-Period Trading via Convex Optimization https://web.stanford.edu/~boyd/papers/pdf/cvx_portfolio.pdf …
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You’re completely right, one of the best things about the paper is that it has a really clear description of single period optimization. Worth reading it just for that!
Could be interesting to know about MPO and think about the problem. Just my opinion that it’s overkill for most strategies (plus you need to be sure your multi-period alphas are consistent and that is non-trivial, getting it wrong will be worse than not trying MPO at all)
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Nice. It could also be interesting to look at optimizing a portfolio via the Wiener-Khinchin-Einstein theorem (spectral portfolio optimization).
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mind giving an example?
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what do you think of the potential use case - “For example, suppose our single period optimization-based strategy tells us to go very long in a rarely traded asset. We may not want to make the trade because we know that unwinding the position will incur large transaction costs. -
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The single-period problem models the cost of moving into the position, but not the cost of moving out of it. To model the fact that we will over time revert positions towards the benchmark,-
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What do you mean by consistent here?
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Very roughly, if you have a fast (1 day) alpha and a slow (10 day) alpha, then if the slow alpha is positive today, your 1 day prediction should be biased positive for the next 10 days.
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im not sure what you mean by “most strategies”, but even relatively simple forecasts tend to realize in a pretty non-linear and usually front-loaded way, for which this type of optimizer is great. but developing it is not the domain of a single-man / small shop.
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