Black-Scholes – a paper house


The 1987 stock market crash had its roots in the misplaced faith the finance industry had in the Black-Scholes framework for option pricing.

Modified Value at Risk

Modified Value at Risk

This Excel spreadsheet implements a Modified Value at Risk (or MVaR) calculation, which adjusts the standard deviation to account for skew and kurtosis in the returns distribution (greater negative skew and kurtosis act to increase VaR).

Calculate Value At Risk in Excel

Today I’d like to clarify the concept of Value At Risk.  I’ll demonstrate how you can calculate VAR in Excel, but I’ll also discuss some of its limitations.

Calculate the Sortino Ratio with Excel

This Excel spreadsheet calculates the Sortino Ratio for an investment, a measure of risk-adjusted return. Investments that emphasize their Sortino Ratio often try to minimize their losses as a part of their trading strategy.

Mean-Variance Portfolio Optimization with Excel

Mean Variance Optimization

This Excel spreadsheet implements Markowitz’s mean-variance theory. It optimizes asset allocation by finding the stock distribution that minimizes the standard deviation of the portfolio while maintaining the desired return. 

Calculate the Sharpe Ratio with Excel

This article describes how you can implement the Sharpe Ratio in Excel. As an alternative method, I’ll also give some VBA code that can also be used to calculate the Sharpe Ratio.