Optimal Portfolio Modeling

Finally, a book that presents modeling formulas to maximize returns and manage risk for serious traders using empirical, statistical techniques. Specific topics covered include the importance of understanding investing as a statistical process. From there traditional concepts of money management are explored and many myths debunked. Formulas are given for the probability that a stop loss or stop profit will be executed. The impact of stops on the average return, probability of success, variance, skew, and kurtosis are examined. The formulas for these mutations in investment outcome have never before appeared in print. In many cases, readers may be shocked at the implications of stop loss techniques. A comprehensive set of optimal investment size formulas are developed which include cases of a single investment at a time and multiple investments both with and without correlations between them.
In addition, the book explains how to extend these formulas to both the case of standard distributions as well as empirical distributions. The goal of the optimal investment size formulas is to both maximize long term compounded return while reducing risk. Individual and professional money managers will also learn how to allocate portfolio assets to mathematically maximize their Sharpe ratio. The book also offers a unique new investment goal designed to maximize the compounded utility of wealth on a compounded basis.