In this article, I would like to show you how to design a CPPI (Constant proportion portfolio investment) strategy and publish it on the Internet. The result is http://18.219.211.47:8501/ (much more fun if you open the link on a big screen rather in a mobile browser)

Here are the steps.

First, let’s remember what CPPI is.

DIVERSIFICATION allows you to eliminate specific or idiosyncratic risks. It cannot help you deal with systematic risk as in 2008 crisis, when systematic risk impacted all the assets simultaneously.

HEDGING, as an alternative, helps you with systematic risks but it is purely symmetric: you…

There are three main volatility models in the finance: constant volatility, local volatility and stochastic volatility models.

Before the stock market crash of 1987, the Black-Scholes (B-S) model which was built on geometric Brownian motion (GBM) with **constant volatility** and drift was the dominant model. In this model, stock price is the only source of randomness and it can be hedged with the underlying stock with a return distribution as log-normal. In the B-S model, the stock price S is described by the following stochastic differential equation (SDE), where W is a standard Brownian motion:

The above Stochastic Differential Equation…

In the early 1980s, *Winter was coming* for Artificial Intelligence (AI) with a period of reduced funding and interest in AI research, which will later be called the “AI Winter”!

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Quant Asset Allocation & Strategy manager in Asset Management, former Goldman Sachs & Merrill Lynch Trader - UC Berkeley & Bogazici Univ Alum