52 Optimizing Optimization
in such an exercise. Heatmaps of portfolio characteristics such as expected return,
transfer coefficient, implied beta, etc. derived by perturbing pairs of constraints with
comparable elasticities give insight into the terrain of optimal portfolio, and can
help discover opportunity pockets that are otherwise difficult to find. Furthermore,
a PM can discover portfolios that have multiple desirable characteristics by over-
laying the level curves of one characteristic over the heatmap of the other. As our
case study illustrated, a systematic application of these ideas can provide access to a
class of multiple interesting solutions to the portfolio optimization problem.References
Ceria, S. (2007). The Quant Scare. Presentation to the London Quant Group, October.
Available at: http://www.axiomainc.com/research_papers.htm
Foley , T. ( 2008 ). Implementing 130/30 equity strategies: diversification among quantita-
tive managers. Institutional Investor ( Summer ) , 56 – 59.