Expected Return Beta Idiosyncratic Variance

A 0.1 0.8 0.0768

B 0.12 1 0.12
C 0.16 1.25 0.1875
Cash 3.00% Lending Rate (=return on Cash Collateral)

Factor Variance 4.00%

Benchmark Weights Portfolio Weights

Longs A 56% 0%
B 26% 50%
C 18% 50%
Shorts A 0% 50%
B 0% 0%
C 0% 0%
Cash Long 0% 50%
Short 0% 0%

Exposure (gross)
Exposure (net)
Return
Volatility
Covariance
Beta

Benchmark
Marginal Contr To Risk
Longs A 0.2703
B 0.2526
C 0.2960
Shorts A -0.2703
B -0.2526
C -0.2960
Cash Long -
Short -

VaR Confidence Level

VaR Horizon [days per business year]

VaR*
*absolute VaR, i.e. the (negative) deviation from the mean return.

Probability of Default**
**probability of losses higher than the capital contributed, i.e. returns < 100%
The figures and basic calculations used in this spreadsheet are from Bruce I. Jacobs, Kenneth N. Levy, Harry M. Markowitz: "Trimability and Fast Op
 Covariance Matrix Longs
A B C Return Shorts
0.10240 0.032 0.04 -0.1
0.032 0.16000 0.05 -0.12
0.04 0.05 0.25000 -0.16
-5.00%

Returns Covariances
10.00% 0.1024 0.032 0.04
12.00% 0.032 0.16 0.05
16.00% 0.04 0.05 0.25
-10.00% -0.1024 -0.032 -0.04
-12.00% -0.032 -0.16 -0.05
-16.00% -0.04 -0.05 -0.25
3.00% 0 0 0
-5.00% 0 0 0

Benchmark Portfolio
100% 200%
100% 100%
11.59% 10.50%
27.03% 34.22%
0.0731 -0.0152
1.00 -0.13

Portfolio
Contr To Risk Percent Contr To RiskMarginal Contr To Risk Contr To Risk
15.23% 56.33% -0.0444 0.00%
6.53% 24.14% 0.2601 13.00%
5.28% 19.53% 0.3799 18.99%
0.00% 0.00% 0.0444 2.22%
0.00% 0.00% -0.2601 0.00%
0.00% 0.00% -0.3799 0.00%
0.00% 0.00% - 0.00%
0.00% 0.00% - 0.00%
27.03% 100.00% 34.22%

99%
30

Benchmark Portfolio
-10.11% -16.97%
e) deviation from the mean return.

Benchmark Portfolio
0.00% 0.06%
an the capital contributed, i.e. returns < 100%
vy, Harry M. Markowitz: "Trimability and Fast Optimisation of Long-Short Portfolios", Financial Analyst Journal, Vol 62, No 2, 2006
 Covariance Matrix Shorts
Beta Shorts Idiosyncratic Varianc A B
-0.8 0.0768 -0.10240 -0.03200
-1 0.12 -0.03200 -0.16000
-1.25 0.1875 -0.04000 -0.05000
Borrowing Rate

-0.1024 -0.032 -0.04 0

-0.032 -0.16 -0.05 0
-0.04 -0.05 -0.25 0
0.1024 0.032 0.04 0
0.032 0.16 0.05 0
0.04 0.05 0.25 0
0 0 0 0
0 0 0 0

Percent Contr To Risk

0.00%
38.00%
55.51%
6.49%
0.00%
0.00%
0.00%
0.00%
100.00%
Vol 62, No 2, 2006
C
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