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Aaron
Thanks a lot for you reply. I will look up the book by Elton as it appears
to discuss in
detail the issues I am looking for.
I am looking for VAMI to decide my bet sizing algorithm. I haven't read
about it but
I understand it is an option as bet sizing in Rina products. I quote below a
previous post
by Michael Berger some time ago, who talks about VAMI that the loss will be
taken out of
the initial VAMI of 1000, & not from increased VAMI due to the profits in
the previous month.
So I am a bit confused. Here goes:
*********************************************************
The drawdown is the maximum account total equity decline, before a new
account equity high is achieved.
Equity & drawdown is generally tracked in terms of VAMI (value of a thousand
dollar investment.) Thus an account is started with a VAMI of 1000. Each
day you calculate the percentage profit/loss & adjust the VAMI. If you
actually start trading with 100,000 & on day 1 you make $5,000, your VAMI at
the end of day 1 would be 1050, calculated as follows:
5000 / 100000(previous day's total equity) x 1000 ( previous
day's vami) = 50
add/subtract result to previous days VAMI: 1000 + 50
The first few days of trading might look as follows:
cashin cashout gain loss total equity VAMI
100000 100000 1000
day1 5000 105000 1050
day2 2000 107000 1070
day3 -7000 0 0 100000 1070
day3 -7000 93000
995.1
Note in this case even though profit / loss in dollar terms were actually
equal, the account shows an approximate 1/2 % decline, because the $ 7,000
loss took place on total equity of 100,000, rather than 107,000, since the
first 7,000 in profit was withdrawn from the account before the loss.
Keep a daily VAMI, & your return will be based on performance, ignoring
deposits or withdrawals to the account.
The max drawdown is also made obvious: it is the highest VAMI to the lowest
VAMI that occurred after the high. The drawdown period continues until a
new high VAMI is achieved.
***********************************************************
Regards,
HT
----- Original Message -----
From: "Schindler Trading" <schindlertrading@xxxxxxxxxxx>
To: "HT" <hemantthakral@xxxxxxxxxxxxxx>; <omega-list@xxxxxxxxxx>
Sent: Saturday, April 27, 2002 6:21 PM
Subject: Re: VAMI & Portfolio selection
> VAMI is just the growth of a $1000 investment from the start of your track
> record. For example, if your first month is down 10% and your second
month
> is up 20% your VAMI index will be $900 the first month and $1080 the
second
> month. What more about it do you want to know?
>
> There are a lot of different ways to pick the securities in a portfolio.
> The primary motivation, though, is diversification. A detailed book that
> covers mean variance portfolio theory, optimal portfolios, efficient
> frontiers, and utility theory is _Modern Portfolio Theory and Investment
> Analysis_ by Elton and Gruber, professors at NYU. I regularly refer to
this
> book.
>
> Let me know what else you find on these two topics.
>
> Best,
> Aaron Schindler
>
>
> ----- Original Message -----
> From: "HT" <hemantthakral@xxxxxxxxxxxxxx>
> To: <omega-list@xxxxxxxxxx>
> Sent: Friday, April 26, 2002 4:23 PM
> Subject: VAMI & Portfolio selection
>
>
> > Hi
> >
> > Could fellow listers please point me to useful resources on Value Added
> > Monthly Return/Index( VAMI )?
> > Also I am looking for literature which deals in detail with the logic
for
> > market selection in a
> > portfolio. Thanks.
> >
> > Regards
> >
> > HT
> >
> >
> >
>
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