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Chapter 14
Advanced Features
This chapter will be of use if you have or want:
• Multiple variances
• Multiple expected return vectors
• Multiple benchmarks
• Compact variances (seldom recommended)
If you merely want constraints on multiple benchmarks, that is easy and is
discussed on page 72.
14.1
Multiplicity
The computation that is performed is really controlled by three entities: the
alpha table, the variance table and the utility table. In the standard case
of no multiplicity, these entities can safely be ignored. When you do have
multiplicity, then understanding what these objects are saying is a good idea.
If you understand them, then you can check to make sure that it is doing what
you want done. If it isn’t doing what you want automatically, then you can tell
it to do what you do want.
If you are generating random portfolios but not optimizing, then you can
skip parts of this chapter. The recommended route in this case is:
• Section 14.2 Alpha and Variance Tables
• Section 14.3 Variance Constraints
• Section 14.4 Expected Return Constraints
Table 14.1 describes arguments to trade.optimizer (and random.portfolio)
that are useful when dealing with multiplicity. All of these arguments have
defaults—you only need to give values for these if the default behavior is not
what you want.
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