Category Financial Modeling

Modern Portfolio Theory: Creating the Capital Allocation Line

In our third installment of the Modern Portfolio Theory series, we will be constructing the Capital Allocation Line, or CAL.  In a way, the CAL is an extension of the efficient frontier.  CAL takes into account a risk-free asset.  In theory there is no risk free asset, so we use what is known as a […]

Modern Portfolio Theory: Developing the Efficient Frontier

No, we are not going to go where no man has gone before.  That’s a different frontier.  The frontier I will be showing you today is the Efficient Frontier, an element of Modern Portfolio Theory that shows the most efficient portfolio of securities for each level of risk. This is an essential tool to gauge […]

Modern Portfolio Theory: Developing a Global Minimum Variance Portfolio (GMV) in Excel

This is the first installment in a series of posts dedicated to “Modern Portfolio Theory”.  In this post, I will show you how to build a Global Minimum Variance (GMV) Portfolio in Microsoft Excel. The GMV Portfolio is the portfolio with the highest return and the least risk.  It takes into account all securities available and uses […]