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Portfolio concepts

Allocation and portfolio-theory vocabulary for research.

• Institutional Portfolio Management: Core PrinciplesGovernance, IPS, benchmarking, rebalancing, and fiduciary discipline that define professional multi-asset management.
• Modern Portfolio Theory (Markowitz) & Optimal Risk DistributionMean–variance optimisation: portfolios on the efficient frontier maximise return per unit of risk given expected returns and covariances.
• DCF Analysis in Company ValuationProject free cash flows to the firm, discount at WACC, add a terminal value — enterprise value minus net debt yields equity value.
• Reading Financial Statements: Balance Sheet & Income StatementBalance sheet: snapshot of resources and obligations. Income statement: economic performance across a reporting period.
• Financial Ratio Analysis & Company HealthLiquidity, leverage, profitability, and efficiency ratios convert accounting lines into comparable, time-series signals.
• WACC & Its Impact on Investment DecisionsWeighted blend of equity and after-tax debt costs using market-value weights; the standard hurdle for corporate NPV and enterprise DCF.
• Sharpe & Sortino RatiosSharpe scales excess return by total volatility; Sortino penalises only downside deviation — kinder to positively skewed strategies.
• Active vs Passive Portfolio ManagementPassive tracks a rules-based index cheaply; active aims to outperform after fees via selection, timing, or factor tilts.
• ROI & Return on Equity (ROE) AnalysisROI measures return on any investment; ROE splits net income by shareholders’ equity — leverage and buybacks change ROE optics.
• DuPont Analysis for Profitability DiagnosisDecomposes ROE into net margin × asset turnover × equity multiplier — pinpoints whether ROE is quality-driven or leveraged.
• Inflation Regimes: Diversification & HedgingInflation shocks differ: demand-pull vs supply shock hedges (commodities, TIPS, real assets, FX).
• Risk Budgeting: Allocating Capital to a ModelAllocate **risk** (vol or marginal VaR), not just notional — aligns sleeves with edge and correlation.
• Smart Beta Fund Strategies for IndividualsRules-based indices tilt toward value, momentum, low-vol, quality, or size — a middle ground between cap-weight passive and discretionary stock-picking.
• M&A Financial Analysis WorkstreamsSynergy modelling, accretion/dilution, trading comps, and liability diligence shape bid price and structure.
• Optimising Portfolios Through Maximum Drawdown PeriodsMax drawdown measures peak-to-trough loss; minimising or bounding it changes optimal weights versus mean–variance solutions.
• Asset Allocation Models by Risk AppetiteConservative, balanced, and growth profiles map to equity/bond/alternatives mixes; risk appetite is not the same as risk capacity.
• Z-Score Screening for Statistical Extremes in Cross-Sectional Quant PortfoliosGaussian vs empirical CDF transforms, winsorisation, multiplicity across names, and linkage to convergence trades.
• Sharpe Ratio Pitfalls & Omega as a Probability–Weighted Performance MeasureGaussian returns myth, unstable moments, threshold-based Omega numerator/denominator, and allocator preferences.
• Risk Parity Funds — Variance Budgeting MathematicsEqual risk vs equal capital, leveraging the cash sleeve, clustered correlation pitfalls and iterative solvers.
• Fractional Kelly Bet Sizing Under Real Market FrictionsFull Kelly vs half/quarter sizing, estimation error tails, autocorrelation and why banks never use textbook Kelly outright.
• Dynamic Optimisation & the Limits of Markowitz Efficient FrontiersPoint estimate covariance fragility, shrinkage estimators, transaction costs as penalty terms and multi-period extensions.
• Expected Shortfall / CVaR as a Preferred Tail Risk Functional vs VaRSub-additivity intuition, optimisation as linear program surrogate, coherence debates and Basel-era regulatory context.
• Core–Satellite Capital Architecture for Liquid & Alternative SleevesCheap beta core, alpha satellites, rebalancing corridors, liquidity tiering and fee budget algebra.
• Correlation Breakdown Toward Unity During Systemic Liquidity SpiralsMechanical diversification failure, covariance eigenstructure spikes, contagion plumbing vs fundamental coupling.

Educational glossary content only — not investment advice.