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Untitled
editThis article should refer to the existing articles on Modern Portfolio Theory and Capital Asset Pricing Model, futures, and futures pricing.
Then it should summarize the key points from those articles that are relevant to Portable Alpha, including the definition of Beta, the defintion of alpha, definition of Rf (risk free rate) and how a financial future's price is purely a mathematically strict function of the risk free rate and today's price of the asset, minus transaction frictions.
It should also describe actual techniques that proponents of Portable Alpha (futures to simulate the beta), and why this technique is actually better (because you can only lend money to the Government at the risk free rate, you can't actually borrow money from anyone at the risk free rate), and why some funds insist on a Beta that is based on correlation to limited indexes like the S&P 500 instead of the optimal index that CAPM describes, namely, all assets in the world.
It might list some degenerate examples of synethic alpha (like going long a future and buying govt bonds)
It might include a "see also" to total return funds and long-short strategies.
Sorry, I pretty much rewrote the whole thing and started over. The previous definition was, as far as my research can tell, starting from an initial misunderstanding and therefore didn't leave much that I could keep. I'd welcome any feedback and edits.
- Neverminding the 'technical' tag, one could reference this book http://books.google.co.in/books?id=1pmWEAHo2A8C&dq=black+litterman&source=gbs_navlinks_s for greater validity of this strategy. Nshuks7 (talk) 14:14, 27 February 2010 (UTC)
130/30
editWhy does 130/30 redirect here when there is no mention whatsoever on the page? I am interested in these types of funds, and came to wiki, only to see this page which isn't really relevant. Suicup 12:02, 20 May 2007 (UTC)
- Added "The purchase of additional assets with the full capital from the short sale is made possible by what is called and enhanced prime brokerage structure" as found here ( http://www.jlem.com/articles/jlem/EnhancedActive.pdf ) —Preceding unsigned comment added by 198.252.8.215 (talk) 12:14, 16 October 2007 (UTC)