Hi all, can somebody suggest me on what is the correct way to calculate
value of a portfolio (i.e. mark-to-market value) with having both long and
short position? For example, suppose I have 3 positions in my portfolio
pos1, po2, and pos3 and type of transaction is long, short, short
respectively.
Say, m2m value of those 3 positions are m1, m2 and m3 in money term. Then
should m2m value of this portfolio be $(m1-m2-m3)?
If this is correct I feel there are some practical problem with this
approach. Let say I calculated the volatility of this portfolio assuming
some normal distribution of return, let say it is $X. Then if I want to
answer, what is the volatility for per unit value of my entire portfolio the
answer would be : $X/$(m1-m2-m3). However if it happenes that $(m1-m2-m3) =
0 then above calculation becomes undefined.
This approach also may be problametic if I have all short, in this case unit
SD for my portfolio becomes obviously negative.
Or should I go with $(abs(m1)+abs(m2)+abs(m3)) to avoid above scenario?
Any explanation would be highly appreciated.
Thanks
[[alternative HTML version deleted]]
_______________________________________________
[email protected] mailing list
https://stat.ethz.ch/mailman/listinfo/r-sig-finance
-- Subscriber-posting only. If you want to post, subscribe first.
-- Also note that this is not the r-help list where general R questions should
go.
