by Chris McKhann

Every trade has a life cycle, but some are longer than others. I think of Warren Buffett saying that his preferred holding period is forever. Options, of course, are a decaying asset, so their life cycle is much more clearly defined.

The good options trade is born out of research. That research likely includes fundamental and technical analysis. Because options are shorter term by nature, most traders of them focus on technical analysis.

Research into an options trade should also include looking at volatility data. The implied (A measure of the volatility of the underlying stock. It is determined by using option prices currently in the market.) and historical volatility (The realized volatility over a specified period. It is calculated by determining the average deviation from the average price in the timeframe.) are vital ingredients to judge the probability of a trade ending profitably.

GETTING STARTED

Some trades have their origination in the trader’s own research. Others come from advisors or newsletters. Still others come from specialized options tools, such as tradeMONSTER’s StrategySeek. Regardless, the life of an options trade should begin not with trade execution but with research (see fig.1)

A RECENT TRADE

An example of how an options trade can be adjusted as it evolves is key to understanding the process. On Jan. 8, I bought 10 puts of the SPY S&P 500 SPDR Exchange Traded Fund for $4.80. With SPY above $114—a new high since the crash in September 2008—and the Volatility Index below 19, I felt that some downside protection made sense.

VIX is a measure of the implied volatility of the S&P 500 Index options and thus gives a good proxy for the relative value of those options.

This put buying could be viewed as a hedge against a portfolio of stocks, a holding in SPY itself or just as a bearish play, regardless of whether I was long any stock.

I bought the June options to reduce the time decay that increases exponentially as the options approach expiration. I figured I might want to hold this put for three to four months, so I bought six months out.

ALWAYS KNOW YOUR EXIT

I also had my exit in mind when I entered the trade. I would exit the puts if they lost half of their value, trading down to $2.40. I also had a time stop, as I knew that I did not want to hold the puts during the last month before expiration.

By Jan. 22, SPY had dropped below…

$110, following two sharp days of declines, and VIX had popped up to 28.

I had to make a decision. I could sell my puts for a profit, but I was not sure if the declines were over. I was also not in the position to just make a quick buck. If that had been my intent, then a nearer expiration would have made more money.

BACK TO THE BOOKS

So I returned to do more research. I wanted to take advantage of the pop in volatility, which had the greatest effect on the nearer-term options. I checked StrategySeek, tested some alternatives and decided to sell the March $110 puts against the June puts that I owned as a calendar spread.

I sold the March puts for $3.95. Now my timing was not the best in terms of the decline. SPY traded all the way down to $105, and VIX spiked again but did not rise much higher than where I had sold.

End of Part 1

To be continue…

by ETFguide.com

For much of the year, stock market volatility has been quiet and almost non-existent. But Europe’s ongoing financial crisis has triggered a massive surge in volatility.

Last week the Dow Jones Industrials (NYSEArca: DIA) recorded a 1,000 point intra-day fall. Other market global barometers like the MSCI EAFE index (NYSEArca: VEA) and emerging markets (NYSEArca: VWO) followed suit. As fear gripped the market, the VIX (Chicago Options: ^VIX) surged.

Contrary to popular opinion, volatility isn’t necessarily bad. In fact, some investors and traders are profiting from it. Let’s analyze three ways to ride the volatility wave.

Selling Options

Options are contracts that allow investors to go long (calls) or go short (puts) on securities. Instead of buying shares of a stock or ETF outright, a call or put option on the underlying security can be purchased at a fraction of the price. This gives the investor leverage because they’re controlling shares of a stock or ETF for a certain period of time in exchange for a premium payment. A bullish investor would buy calls whereas bearish investors would purchase puts.

Another way to think about options is as a form of insurance. When is the cost of insurance or your premium payments usually the most expensive? It’s when the threat of losses is high.

Similarly, the cost of insurance or options premiums are more expensive when market volatility is high, like it is right now. Put another way, selling options to collect high options premiums is one way to ride the volatility wave.

Leveraged ETFs

Buying leveraged long/short ETFs are another way to play rising market volatility. These types of ETFs attempt to magnify the daily gains of their underlying benchmarks usually by 200 or 300 percent. So long as you’re OK with market volatility, leveraged long/short ETFs can usually get the job done, regardless of whether you’re bullish or bearish.

The ProShares UltraShort S&P 500 ETF (NYSEArca: SDS), for example, attempts to double the daily opposite performance of the S&P 500. If the S&P 500 declines by one percent on any given day, SDS should theoretically rise by 2 percent.

Funds like the Direxion Daily Large Cap Bull 3x Shares (NYSEArca: BGU) aim for triple daily performance of large cap stocks. If large cap stocks rise by one percent on a certain day, BGU should record a three percent gain.

Play the VIX

The VIX indicator has become a popular gauge of investor fear and complacency. A high VIX reading signals fear whereas a low reading means increasing risk appetite among investors. How does the VIX work? By using a weighted blend of various S&P index options, the VIX attempts to estimate the implied volatility for the S&P 500 over the next 30 days. After recently touching 52-week lows, the VIX spiked and now sits around 30.13.

Another way to ride the volatility wave is through the iPath S&P 500 VIX Short-Term Futures ETN (NYSEArca: VXX) which is linked to the S&P 500 VIX Short-Term Futures Index. VXX offers exposure to a daily rolling long position in the first and second month VIX futures contracts and reflects the implied volatility of the S&P 500 Index at various points along the volatility forward curve. The index futures roll continuously throughout each month from the first month VIX futures contract into the second month VIX futures contract.

One caveat about VXX and all ETNs: They carry credit risk just like bond investments. Therefore, anyone investing in VXX would do well to closely monitor Barclays Bank’s credit situation. If it suddenly changes for the worse, it may be time to bail.

Conclusion

The EU’s $1 trillion plan to backstop the euro dollar (NYSEArca: FXE) has already been heralded by some observers as the panacea for Europe’s problems. Others have their doubts.

So as bulls and bears debate about what this means for the future of world markets, one thing we can all probably agree on is that chaos and volatility is here to stay.

by Richard Lehmann

Investors moved $69 billion into municipal bond funds last year. Don’t follow the lemmings into these future default traps.

The municipal bond landscape has changed substantially since the financial crisis, and not for the better. The problems began in late 2007 with the downgrading of the bond insurers. These firms-Ambac ( ABK ), MBIA and others-collected insurance premiums from smaller issuers of tax-exempt bonds to guarantee the bonds against default. This insurance made the bonds more salable by giving them a ratings upgrade to AAA.

The system worked beautifully until the insurers veered off into the business of guaranteeing exotic credit derivatives on mortgages and other debt. Losses there impaired the insurers’ balance sheets, so the debt they insured lost its automatic AAA rating. Thus, a muni market dominated by interchangeable AAA credits became a bazaar where you now have to know a lot more about the obscure sewer authority or airline that is borrowing the money.

In the past year the muni market has seen a strong rebound. Helping out: the realization among savers that the new Big Government politicians are going to jack up income taxes. That makes U.S. Treasury bonds relatively less attractive. Last year saw $69 billion of net inflows into tax-exempt bond funds.

Don’t follow the lemmings into muni funds. This sector is going to see a lot of pain, and it has nothing to do with federal tax brackets. It has to do with the fact that states and cities are having trouble paying their bills.

Defaults on tax-exempt bonds are the highest since my Distressed Debt Securities Newsletter began tracking defaults in 1983. In 2009, 183 issuers defaulted on $6.3 billon in tax-exempt debt. The majority of these defaults involved entities with taxing power (like the 99 Florida Community Development Districts). It’s only a matter of time before you start seeing defaults on the general obligation debt of state and local governments.

Lavish government pensions are the problem, as FORBES has well documented. Policemen, firemen and jail clerks retire young and collect inflation-adjusted pensions. There is far from enough money set aside to cover benefits already earned. The result is that the government employer will find itself paying two cops instead of one: the one who is now pounding the pavement and the one who was doing the job before.

Don’t expect economic growth or increased taxes to fix this problem, and don’t expect politicians to get tough with unions representing government workers. When the cash runs out, the pension checks still go out. It’s the bondholders who get stiffed.

The next hazard for muni bond owners is inflation. It takes a real act of faith to believe that the fiscal and monetary actions taken to stem the financial crisis will not lead to high inflation.

Washington has taken notice of the budget problems at the municipal and state levels. Aside from bailing states out of their deficits with donations to their operating accounts, federal politicians included in the economic stimulus package a subsidy of municipal financing for capital projects via Build America Bonds. This program creates a new kind of taxable municipal bond that comes in two forms. Tax Credit Build America Bonds pay bondholders taxable interest income but provide them with a tax credit equal to 35% of the interest received. The more popular alternative to these bonds among municipalities are Direct Payment Build America Bonds. For these bonds the Treasury provides the issuing municipality a 35% subsidy when each interest payment comes due. The bondholder in this case receives no tax deduction or credit, only a higher interest rate. These bonds are hugely popular with municipalities, so expect them to become a permanent federal program. They also have a ready market among corporate bond buyers who are suffering from a lack of new issues. Be careful when buying any of these bonds. You need to know which type of bond you are being offered, since the difference in interest yield will be significant.

Moody’s ( MCO ) says it’s changing the rating scale for some 70,000 municipal bonds to bring them in line with sovereign and corporate ratings. This may result in a short-term uptick in prices for the muni market, but the timing couldn’t be worse. I still don’t want to own these bonds.

If you must put some money in municipal bonds, look for insured bonds that got downgraded when the insurers got downgraded. The insurance may no longer be worth much, but the vetting by the insurance companies–which were pretty cautious about the borrowers they could trust–is still worth something.

By Alistair Barr, MarketWatch

Deutsche Bank expects $222 billion of inflows this year

The hedge fund industry will likely rebound to its pre-crisis size as investors pour money back into the business in search of market-beating returns and downside protection, Deutsche Bank said Tuesday. The German lender surveyed 606 investor entities with more than $1.07 trillion in hedge fund assets in January and 73% of them predicted over $100 billion of inflows into the industry this year.

“We estimate the inflow figure to be closer to $222 billion, taking the industry to $1.722 trillion this year,” Deutsche Bank said in a report on the survey. “The industry is now predicted to grow further and return to previous highs.”

Industry assets reached a record of almost $1.9 trillion in 2007, according to Chicago-based Hedge Fund Research Inc. But the collapse of Lehman Brothers and a ban on short selling of financial stocks left the industry with record losses and unprecedented investor redemptions. By the end of 2008, assets had slumped to $1.4 trillion and almost 1,500 funds had liquidated.

However, surviving managers generated their best returns in a decade in 2009 as equity markets and corporate bonds rebounded strongly on the back of massive fiscal and monetary stimulus.

“2009 has proven that market disruptions create great opportunities and furthermore, what a year’s worth of good performance can do for the industry,” Deutsche Bank wrote.

Bullish

Hedge fund investors are bullish for this year, although that may not necessarily bode well for the stock market given their predictive powers last year, according to Deutsche Bank’s survey results. More than two-thirds of investors predicted a positive year for the Standard & Poor’s 500 index in 2010, with the majority forecasting a gain of 5% to 10%. Almost three quarters of investors polled predict positive performance for the MSCI World index, which includes more emerging markets, Deutsche Bank noted. However, when Deutsche Bank asked similar questions at the start of 2009, 59% of investors predicted the S&P 500 would finish the year in negative territory.

“One must remember that very few investors managed to get it right for 2009,” Deutsche Bank wrote.

Investors are also optimistic about hedge fund returns in 2010 — and they’re even more confident about their own abilities to make money, Deutsche Bank found. About a third of investors surveyed are calling for the HFR Hedge Fund Index to return 5% to 10% in 2010. Roughly 20% expect gains of 0% to 5% and another 10% of investor polled see returns of 10% to 15%, Deutsche Bank reported. Meanwhile, more than 40% of investors surveyed expect their own hedge fund investments to return 10% to 15%.

Global macro funds, which bet on broad economic and market trends, are expected to perform the best in 2010, closely followed by equity hedge funds and distressed debt managers, which trade securities of companies close to or in bankruptcy.

Volatility arbitrage funds, which bet on how violent market moves may be, commodity trading advisors and convertible arbitrage managers are expected to perform the worst, investors told Deutsche Bank.

by Geraldine Fabrikant – NY Times

Mr. Dunn landed on Wall Street in 1985, and today he is a senior vice president for investments at the private wealth management unit of Merrill Lynch. But he believes strongly that his training in psychology was the most useful part of his education.

Mr. Dunn, 58, supervises a team that oversees portfolios starting at $250,000. His personal specialty as a financial adviser is families with $5 million or more in investments.

But he says people of all levels of wealth have come to view their assets differently after the financial crisis.

Q. What is that change?

A. This generation got scared. They had never seen anything like the crisis. There were people in the market who were just common Joes; whether they had $100,000, $1 million or $10 million, they all lost a lot of money. And even people who are worth $50 million got frightened. They realized that they could lose a lot, and they are more focused today on preserving their capital.

Q. For people who got hit, are they able to cut back if they have to?

A. For people who have had money and lost it in the market, if they have a certain lifestyle, it can be very difficult to dial down because they are often in denial. It is interpersonal. It is about how they deal with their spouses, with their children and with others. They look in the mirror and the person who has less is not who they want to see. They can still have millions in the bank and feel like paupers.

Q. Is it easier for people who are very wealthy?

A. The amount of money does not matter at all. Their emotionality is the same whether they have $1 million or $10 million. There are people who live in New York and they just don’t have a big lifestyle. Their identity is not based on what they spend. Some of them live a very frugal existence.

But in some of these large cities, the cost of living is much higher than other areas and therefore people need a larger nest egg.

If a couple had $5 million, for example, they should not spend more than $250,000, or 5 percent of their assets pretax. If their portfolio drops to $4 million, they should live on $200,000. That means they have 25 percent less money to spend, and many people are having a hard time making that adjustment. These people need to pull back even more than the percentage decline in the portfolio, and it is hard to make the behavioral changes necessary.

Q. Is it easier when people are still working?

A. Yes. I find that if people are still working, they don’t spend the money that has been in their savings.

Q. What if they are already retired?

A. They have to discipline themselves not to spend more than 4 or 5 percent of their pretax income in any year. I bring it up with clients because I prefer to talk to them when they still have the opportunity to make a choice. I tell them that if they keep on spending at a higher rate, they could run out of money.

Q. Is it always about getting people to cut back?

A. No, not at all. I had a client who had lost a spouse and this person was very, very frugal and worried about spending money. I had to reassure them that they had enough money to spend more. But people get frightened. I said, “You have enough money to keep on spending the way you are and you will be fine.” If you aare feeling scared, you should own up to it.

Q. Do you think people are facing up to the potential problems of retirement, which is generally considered to be far more difficult than it was years ago?

A. Generally not. It is very scary. So many people are dealing with school costs and all those other expenses with raising children, and if you ask them how they are going to deal with retirement, they are going to have so much fear that they really cannot cope with the discussion.

Q. And once they do focus, what do they need to know?

A. My concern is seeing people who currently have not saved enough for retirement and are approaching it in the next several years. From a health care point of view, the current system is unsustainable because the costs of Medicare and medical care are escalating at an unsustainable rate. At the same time, government subsidies — whether medical, Social Security or unemployment – are unsustainable in their current form.

By: CNBC.com

Global stocks were mixed on Thursday as data showing Chinese inflation rose to a 16-month high in February spurred policy tightening talk. But experts told CNBC investors should buy stocks related to the Asian growth story.

Long-term Opportunities in China

There are plenty of long-term opportunities in China, that’s according to Yoong-Chou Chong, Investment Director, Asia at Aberdeen Asset Management. He discusses some of his stock picks.

Buy Consumer-Related Stocks, Telecoms

Get exposure to consumer-related stocks and telecoms with strong cash flow and presence in emerging markets, says James Holt, vice president of BlackRock Investment Management.

Markets Watching For China Tightening

Richard Yetsenga, regional FX strategist at HSBC, tells CNBC that markets are used to strong Chinese economic data and Beijing is likely to deliver another reserve requirement hike to keep liquidity under control.

China Successful in Reining in Growth

If China’s inflation stays around the 2-3% range, that signals Beijing is successful in reining in excessive growth, says Thomas Byrne, senior vice president and regional credit officer, sovereign risk unit at Moody’s Sovereign Risk Group. He shares his initial reaction to fresh Chinese data.

Inflation a Risk for China

With China’s two engines, domestic demand and exports, roaring back, it will face the risk of inflation, says Frederic Neumann, senior Asian economist at HSBC. He shares his outlook for the economy.

2010 Will Be a Good Year for Aussie Stocks

2010 will be a good year for Australian stocks, says Paul Taylor, portfolio manager at Fidelity International. He tells CNBC why and what kind of companies will stand out this year.

Hot on Australia’s Media Sector

Australia’s media sector looks attractive to Paul Taylor, portfolio manager at Fidelity International. Taylor also reveals his other top Aussie stock picks.

Unexplainable Rise in Oil a Good Sign

The unexplainable rise in oil prices is a bullish sign, according to Adam Mesh, CEO of Adam Mesh Trading Group.

By: Bankrate.com

Change is the only constant in the workplace. In recent years, workers at all levels have felt the impact of change – from massive job layoffs to budget cuts to new management. For those who remain employed, managing change at work has become part of everyone’s job description.

Yet a recent survey conducted by Right Management, a career management consulting firm, shows that 31 percent of employees are not able to adapt to changes at work.

Failing to adapt can leave employees more vulnerable to layoffs than ever.

Below, experts address common worker concerns about how to manage change at work.

Q: “I’m paranoid that I’ll get a pink slip. How do I avoid sabotaging my own career?”

Watching your former co-workers walk out the door can leave you feeling paranoid about your own job security. Fear can lead to low productivity and reduced enthusiasm for your job. Since you ultimately don’t have complete control over your job, don’t let the fear of downsizing stop you from doing the best job you can, says Caitlin Friedman, co-author of “The Girl’s Guide to the Big Bold Moves For Career Success: How to Build Confidence, Conquer Fear, Manage Up, Navigate Change and Much, Much More.”

“Maintain a high level of work at your current job, and grow and nurture a vibrant network outside of it,” she says. “If you make these activities a priority, then you are protecting your reputation and you are massaging relationships that might come in handy should you get laid off down the road.”

Q: “My new boss’ management style isn’t a good fit with my work style. How do I adapt?”

A new boss can certainly bring a lot of cultural changes to your workplace, as well as a new set of responsibilities for your job in particular. Cheryl Palmer, career coach at Call to Career, advises workers to allow some exploratory time with a new manager.
“Take the time to get to know your new boss to develop a good working relationship with him or her. Clearly defining expectations is the first step in developing that relationship. If you know what your boss expects of you, you can be happier and more productive at work,” says Palmer.

Q: “How can I stay competitive in this tough job market?”

“In the past 18 months, employees received a loud and clear answer to a nagging question: Yes, Virginia, you are expendable,” says Barbara Poole, founder and CEO of Employaid, an online community for workers and employers.

Written by: Nigel Schwartz

Recent turmoil in the global financial markets has convinced countless investors to explore alternative assets, and smart investors are no longer solely focused on ways to maximize their capital gains. They are all seeking tried-and-true strategies for preserving wealth, and a great many have chosen to invest in natural colored diamonds.

In times like these, investors would be wise to consider alternative assets that provide a reliable store of value. A meaningful capital preservation strategy is the path of the responsible investor during these chaotic times. With this in mind, there has never been a better time to consider investing in rare colored diamonds. Let’s explore a few of the characteristics that make natural colored diamonds such an attractive store of value.

Diamonds have an extremely high value in contrast with their diminutive size and weight. A two carat intense fancy yellow diamond is worth approximately $25K, and weighs less than 1/70 of an ounce. If the need ever arose, millions of dollars worth of diamonds could be concealed and transported on one’s person. For hundreds of years, diamonds have been used as a medium to discreetly transport wealth across troubled borders. As a wise man once said, wealth knows no borders.

Natural colored diamonds also have a rock solid history of steady price appreciation, which is a very appealing characteristic for the keen investor. Just recently, the Wittelsbach blue diamond sold for $24.3 million at Christie’s in London, setting a record price for any diamond or jewel sold at auction. An oval-shaped, vivid yellow diamond weighing 36.99 carats, sold at Sotheby’s New York in December 2008 for $71,870 per carat.

Lastly, demand for fancy colored diamonds has skyrocketed in recent years. This is partially due to consumer awareness regarding the natural rarity of coloured diamonds, for out of 10,000 carats of diamonds mined only one carat will turn out fancy colored; with the rarest colored diamonds being red, blue, green orange and pink. The reality is that supplies of coloured diamonds are decreasing while demand is increasing, resulting in a great opportunity for investors as prices continue to increase.

06 March 2010 – Phil Craig by Wealth-bulletin

Global investment on commercial property will rise 30% this year to $478bn (€352bn), thanks in part to a resurgent US market, according to new research published today.

Investment flows into US commercial property are forecast to rise 50% this year, as institutional investors return to the market, and distressed sellers begin to offload properties that they tried not to sell when markets were weak last year. Volumes in Europe, the Middle East and Africa are set to rise 44%, while volumes into Asia Pacific are forecast to rise 20%.

The forecasts come from property agency Cushman & Wakefield, which says that the property recovery in 2010 could even beat its predictions if the global economy improves.

David Hutchings, the head of European research at the company, said: “While challenges clearly remain and a double-dip can not be ruled out, a higher-risk appetite among financiers and investors will continue to fire the market. With the recovery now backed by local and international players, we anticipate higher levels of activity and a total deal volume up 30% to $478bn this year. With investor demand for prime space running ahead of supply, yield falls will continue even without any signs of renewed rental growth”.

The rise compares with $365bn of investments last year, 23% down from 2008 – and the lowest level since 2003.

In absolute terms, countries in the Asia Pacific region – specifically China – will remain the top destination for property investments, according to the research. Last year, a surge of money into China meant that investment flows into the country’s property market boomed by 143% compared with the previous year.

As a result, China was last year the top target for real estate investment in the world, followed by the UK and the USA respectively. Eight of the world’s top 20 property investment markets are now based in the Asia Pacific region.

Donald Han, the company’s regional managing director in Singapore, said: “The two largest markets in Asia Pacific are China and Japan. China will continue to see vibrant investment activity, despite recent government measures to cool down the property market. Japan is looking increasingly compelling with a relatively high spread between yield and finance cost and with huge investment grade opportunities, particularly distressed assets, selling at below replacement cost. We are expecting opportunistic buying activity this year.”

The news comes after enthusiasm for UK commercial property, since late last year, has led to property funds run by asset managers, including Scottish Widows Investment Partnership, Aviva Investors, and Henderson New Star accruing cash piles worth hundreds of millions of pounds, according to research by Financial News.

MDM Partners will help you solve a variety of practical tasks including:

Find the most appropriate asset allocation according to your investment goals, market history and forecasts;

Analyze risks of your investment portfolio from various perspectives (volatility, value-at-risk, shortfall probabilities);

Arrive at adequate portfolio rebalancing strategy to minimize rebalancing transaction costs.

Supported analytical methods include shrinkage estimators, robust portfolio optimization, walk-forward portfolio optimization, benchmark tracking, Black-Litterman model, factor models, and many others.

Features

Our advanced knowledge team gives the investors all they need. The most important features are outlined below:
General
Fully supports the multi-period investment paradigm.
Fully supports portfolios featuring assets with non-Gaussian distribution of returns, or non-linear inter-dependencies, including options and hedge funds. This is achieved through direct simulation of portfolio dynamics with no model assumptions.

Portfolio Construction

Simultaneous creation of two environments for portfolio analysis:
• Analytical environment: logarithmic price increments are assumed to be independent normally distributed random variables.
• Historical environment: optimization and other procedures are based directly on historical prices.
Risk-free asset option.
Factor-selection option for a factor-based asset pricing model.

Estimation of parameters

Stambaugh combined-sample estimates, used if asset histories differ in length.
Jorion expected-returns estimate, which shrinks sample average returns to a common value.
Ledoit-Wolf covariance-matrix estimate, which shrinks the sample covariance matrix to the constant correlations covariance matrix.
Pastor-Stambaugh-Wang joint estimate of expected returns and co-variances, which shrinks sample estimates to their respective counterparts, implied by the selected factor model.
MacKinlay-Pastor joint estimate of expected returns and co-variances, based on the assumption that prices are explained by an unobservable factor.
The Black-Litterman model that incorporates subjective investor views in parameter estimation and asset allocation process.

Portfolio optimization

Three optimization criteria:
• Maximization of an expected utility with constant relative risk aversion
• Minimization of target shortfall probability.
• Benchmark tracking.
Robust portfolio optimization (worst-case scenario optimization): the resultant portfolios demonstrate optimal behavior under the worst-case scenario.
Walk-forward optimization
Optimization engine based on IPOPT (Internal Point OPTimizer) — one of the most powerful nonlinear optimizers available today.

Target shortfall probabilities analysis

Calculation of target shortfall probabilities according to selected ranges for the investment horizon and target rate.

Value-at-Risk analysis
Simultaneous calculation of two risk measures: Value-at-Risk (VaR) and Conditional Value-at-Risk(CVaR).
Various techniques for calculation of VaR and CVaR, including:
• Delta-Normal Method (DNM)
• Empirical distribution
• Implied normal distribution
• Implied non-central t-distribution.
• Cornish-Fisher expansion.
Construction of VaR and CVaR surfaces according to selected ranges for the investment horizon and significance level.
Historical simulations
Simulations of portfolio strategies with continuous rebalancing.
Simulations of portfolio strategies with continuous rebalancing and portfolio insurance — these strategies are optimal in a situation when a predetermined portion of the initial wealth and/or accumulated profits must be maintained.
Portfolio-strategy simulations with “inaction region” rebalancing — these strategies are optimal in the presence of proportional transaction costs.
Portfolio-strategy simulations with “inaction region” rebalancing and portfolio insurance.

Miscelaneous

“Three-fund” portfolio calculation — utility-based portfolio, optimal in the presence of an estimation error in the model parameters.
Utilization of Block Bootstrapping algorithm in the calculation of VaR, CVaR, and shortfall probabilities.
Determine Inaction region optimal size in the presence of proportional transaction costs, based on a multidimensional extension of the Davis-Norman approach.
Wide range of optimization constraints, which also include:
• Constraints on assets groups
• Highly non-linear margin constraint to account for margin requirements in portfolio components.
Various performance measures including Information ratio, Sortino ratio and STARR ratio.