Detailed Description of Portfolio Optimization 2.0

The Excel Portfolio Optimization template calculates optimal capital weightings for a portfolio of financial investments based on the highest return for the least risk. The Excel template is designed to apply portfolio optimization to either financial securities or business stream portfolios. The application of portfolio optimization to business units within an organization provides a framework for driving capital allocation, investment and divestment decisions for financial management.

Key features of the Excel Portfolio Optimization template include:
* Simple and intuitive data input with flexible options and available help information.
* Input for the number of units held in up to 100 investment products or business streams drives automatic current weighting calculation.
* Minimum and maximum weighting constraints can be specified for each asset for the optimized portfolio to reflect obligations and restrictions.
* An option is provided to 'Maintain Current Return Level' ensure that return is not deteriorated based on changes in risk in the optimized portfolio.
* The correlation matrix and portfolio dynamics calculated from the historical input data can be modified before running the optimization process. This allows for assumptions on future trends and relationships to be accounted for in the optimal portfolio.
* The optimization analysis can be set calculate and account for downside risk only under the Sortino ratio, as opposed to the Sharpe ratio.
* The comparison between the current and optimized portfolio is displayed graphically as well as with unit buy and sell changes required.
* A target return can be specified for which probability of achieving it is calculated and displayed using Monte Carlo analysis.

TAGS OF PORTFOLIO OPTIMIZATION

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