Package com.webcab.ejb.finance.portfolio

Apply the Markowitz and Capital Asset Pricing Model (CAPM) to analyze and construct the optimal portfolio with/without asset weight constraints with respect to Markowitz Theory by giving the risk, return or investors utility function; or with respect to CAPM by given the risk, return or Market Portfolio weighting.

See:
Description

Interface Summary

AssetParameters	Within this Enterprise JavaBean we provide procedures for the evaluation of various quantities which are required within the application of this Component.
AssetParametersHome	The home interface of the stateless AssetParameters Enterprise JavaBeansTM component.
AssetParametersLocal	Local interface of AssetParameters.
AssetParametersLocalHome	Local Home interface of the AssetParameters Enterprise JavaBean.
CapitalMarket	This Enterprise JavaBean applies the Capital Asset Pricing Model (CAPM) to analyze the construction and qualitative nature of a portfolio's risk-return characteristics.
CapitalMarketHome	The home interface of the CapitalMarket Enterprise JavaBeansTM component.
CapitalMarketLocal	Local interface of CapitalMarket.
CapitalMarketLocalHome	Local Home interface of the CapitalMarket Enterprise JavaBean.
EasyOptimal	This Enterprise JavaBean presents the key functionality made available from the Markowitz Theory and Capital Asset Pricing Model (CAPM) within this product in an easy to use and quickly understandable form.
EasyOptimalHome	The home interface of the stateless EasyOptimal Enterprise JavaBeansTM component.
EasyOptimalLocal	Local interface of EasyOptimal.
EasyOptimalLocalHome	Local Home interface of the EasyOptimal Enterprise JavaBean.
Interpolation	Within this class we offer methods by which the Efficient Frontier can be constructed from a finite set of known points.
InterpolationHome	The home interface of the stateless Interpolation Enterprise JavaBeansTM component.
InterpolationLocal	Local interface of Interpolation.
InterpolationLocalHome	Local Home interface of the Interpolation Enterprise JavaBean.
Markowitz	This Enterprise JavaBean applies the Markowitz Model to analyze the construction and qualitative nature of a portfolio's risk-return characteristics.
MarkowitzHome	The home interface of the Markowitz Enterprise JavaBeansTM component.
MarkowitzLocal	Local interface of Markowitz.
MarkowitzLocalHome	Local Home interface of the Markowitz Enterprise JavaBean.
PerformanceEvaluation	Within this Enterprise JavaBean we offer a number of procedures which assist in accessing the return and risk-adjusted return on an investment portfolio.
PerformanceEvaluationHome	The home interface of the stateless PerformanceEvaluation Enterprise JavaBeansTM component.
PerformanceEvaluationLocal	Local interface of PerformanceEvaluation.
PerformanceEvaluationLocalHome	Local Home interface of the PerformanceEvaluation Enterprise JavaBean.
SolveFrontier	Within this Enterprise JavaBean we provide methods by which the optimal portfolio can be selected from the Efficient Frontier when the investor describes his investment preferences.
SolveFrontierHome	The home interface of the stateless SolveFrontier Enterprise JavaBeansTM component.
SolveFrontierLocal	Local interface of SolveFrontier.
SolveFrontierLocalHome	Local Home interface of the SolveFrontier Enterprise JavaBean.
TwoAssetPortfolio	Here we present a number of methods which enables the evaluation of risk/return characteristics of portfolios which consist of two assets.
TwoAssetPortfolioHome	The home interface of the stateless TwoAssetPortfolio Enterprise JavaBeansTM component.
TwoAssetPortfolioLocal	Local interface of TwoAssetPortfolio.
TwoAssetPortfolioLocalHome	Local Home interface of the TwoAssetPortfolio Enterprise JavaBean.
Volatility	This Enterprise JavaBean consists of a collection of methods for estimating and rescaling the volatility.
VolatilityHome	The home interface of the stateless Volatility Enterprise JavaBeansTM component.
VolatilityLocal	Local interface of Volatility.
VolatilityLocalHome	Local Home interface of the Volatility Enterprise JavaBean.

Class Summary

OptionsConstants	This class defines constants used by the Options Enterprise JavaBean methods.
PointsOnEfficientFrontier	This class encapsulates/represents the points of the efficient frontier.

Exception Summary

AboveException	The `AboveException' exception is thrown when the investors utility function does not select an optimal portfolio from the Efficient Frontier because for all values of the expected return considered the Utility function is greater than the Efficient Frontier.
AssetParametersDemoException	This exception is thrown by the demo version of the AssetParameters EJB component after the number of maximum business method invocations has been reached.
BelowException	The `BelowException' exception is thrown when the investors utility function does not select an optimal portfolio from the Efficient Frontier because for all values of the expected return considered the Utility function is less than the Efficient Frontier.
CapitalMarketDemoException	This exception is thrown by the demo version of the CapitalMarket EJB component after the number of maximum business method invocations has been reached.
EasyOptimalDemoException	This exception is thrown by the demo version of the EasyOptimal EJB component after the number of maximum business method invocations has been reached.
EfficientFrontierNotCalculatedException	This exception is thrown if the efficient frontier has not been properly calculated using the calculateEfficientFrontier() method.
InterpolationDemoException	This exception is thrown by the demo version of the Interpolation EJB component after the number of maximum business method invocations has been reached.
InterpolationException	This exception will be thrown to indicate errors in input values for any of the implemented methods.
MarkowitzDemoException	This exception is thrown by the demo version of the Markowitz EJB component after the number of maximum business method invocations has been reached.
NoSolutionException	This exception is thrown to indicate that there are no portfolios with the expected return as requested in one of the methods.
OptionsException	Exception usually thrown to indicate error in input values.
PerformanceEvaluationDemoException	This exception is thrown by the demo version of the PerformanceEvaluation EJB component after the number of maximum business method invocations has been reached.
PortfolioException	This is the base exception class for all other exceptions thrown by the Portfolio Enterprise JavaBean.
ReferencedServiceException	This exception is thrown if an error occurs while invoking methods of another Enterprise JavaBean.
SolveFrontierDemoException	This exception is thrown by the demo version of the SolveFrontier EJB component after the number of maximum business method invocations has been reached.
SolveFrontierException	This is the Solve Frontier Enterprise JavaBean exception which is known if no solution is found for the given input parameters.
TooManyPortfoliosException	This exception is thrown if the number of optimal portolios found exceeds 100.
TwoAssetPortfolioDemoException	This exception is thrown by the demo version of the TwoAssetPortfolio EJB component after the number of maximum business method invocations has been reached.
UtilityFunctionNotInitializedException	This exception is thrown to indicate that the utility function has not been properly set using the setUtilityFunctionPoly() and setUtilityFunctionInterp() methods.
VolatilityDemoException	This exception is thrown by the demo version of the Volatility EJB component after the number of maximum business method invocations has been reached.

Package com.webcab.ejb.finance.portfolio Description

Apply the Markowitz and Capital Asset Pricing Model (CAPM) to analyze and construct the optimal portfolio with/without asset weight constraints with respect to Markowitz Theory by giving the risk, return or investors utility function; or with respect to CAPM by given the risk, return or Market Portfolio weighting. Also includes Performance Evaluation, extensive auxiliary classes/methods including equation solve and interpolation procedures, analysis of Efficient Frontier, Market Portfolio and CML.

What problems does this Components address

The principle aim of this component is to provide a through and flexible implementation of the Markowitz Theory and Capital Asset Pricing Model of Portfolio Theory. The main questions where are addressed by these theories which can be answered using our Component are as follows:

• Markowitz Theory - Allows the `optimal' portfolio constructed from a collected of assets to be selected when the risk, expected return or investors utility function is known.
1. What is the portfolio which can be constructed from a given set of assets which has the lowest risk for a given value of the expected return? (See Markowitz.efficientFrontier(double, int) and Markowitz.efficientFrontier(double, double[][], double[], double)).
2. What is the portfolio which can be constructed from a given set of assets which has the greatest expected return for a given value of the total risk? (See SolveFrontier class and in particular SolveFrontier.findReturn(double, double[], double[]) and SolveFrontier#findReturn(double[], double[], double[], double[], double)
3. What is the portfolio(s) which can be constructed from a given set of assets which is optimal with respect to the investors risk/reward utility function? (See Markowitz.optimalPortfolio and Markowitz.optimalPortfolioMaxExpected).
• Capital Asset Pricing Model (CAMP) - Allows the `optimal' portfolio constructed from a collection of assets with the option of either lending or borrowing cash, to be selected when the risk, expected return, weighting of the Market Portfolio are known.
1. What is the portfolio which can be constructed from a given set of assets with the option of borrowing or lending cash at the prevailing market rate, such that the total risk is minimized for a given value of the expected return? (See CapitalMarket.weightCML to construct the optimal portfolio and CapitalMarket.riskCML to evaluate its total risk).
2. What is the portfolio which can be constructed from a given set of assets with the option of borrowing or lending cash at the prevailing market rate, such that expected return is maximized for a given value of the total risk? (See CapitalMarket.returnCML class to evaluate associated expected return and then CapitalMarket.weightCML to construct the optimal portfolio).
3. What is the weighting of the Market Portfolio (i.e. non-cash part) within the optimal portfolio given by its expected return when the portfolio can be constructed from a given set of assets with the option of borrowing or lending cash at the prevailing market rate? (See CapitalMarket.weightCML in order to evaluate the weighting and then CapitalMarket.riskCML to evaluate its risk).

An Overview of the classes of this Component

This component contains the following business classes:

1. AssetParameters - Auxiliary class which offers methods to assist in the evaluation and estimation of various parameters which are then used within the methods of the main classes.
2. CapitalMarket - Implements the Capital Asset Pricing Model (CAPM). The CAPM is an extension of the Markowitz theory in that in the construction of an optimal portfolio along with (risky) assets you may borrow or lend (zero risk) cash at the prevailing market rate.
3. Interpolation - Offers methods by which the Efficient Frontier can be constructed from a finite set of points.
4. Markowitz - Implements the Markowitz model, that is, we offer method which allow the portfolio with the least return to be constructed from a collection of assets.
5. PerformanceEvaluation - Offers a number of procedures for accessing the return and risk adjusted return (Treynors Measure, Sharpes Ratio).
6. SolveFrontier - This class complements the methods found within the Markowitz class which allow you to find for a given expected return the corresponded portfolio on the Efficient Frontier. Here we also allow you to provide the value of the total risk and we will find the corresponding values of the expected return of the portfolio on the efficient frontier.
7. TwoAssetPortfolio - Evaluation of the optimal weighting of a portfolio with two assets. This functionality can be used to analyze the effect of a single purchase or sale from an arbitrary portfolio.
8. Volatility - Auxiliary class which offers methods to assist in the evaluation of the volatility, variance and covariance of the assets.