Optimizing Optimization: The Next Generation of Optimization Applications and Theory (Quantitative Finance)

0.75

0.7

0.65

0.6

0.55

0.5

0.45

456

Portfolio systematic volatility

789

0.95

0.9

0.85

0.8

Mean portfolio alpha

Alpha uncertainty frontier

MV frontier Sys 5% and alpha uncertainty

Spe 2% and alpha uncertainty

Figure 1.6 Portfolio systematic volatility with alpha uncertainty and constraints on
systematic and specific risk.

0.75

0.7

0.65

0.6

0.55

0.5

0.45

123

Portfolio specific volatility

456

0.95

0.9

0.85

0.8

Mean portfolio alpha

Alpha uncertainty frontier

MV frontier Sys 5% and alpha uncertainty

Spe 2% and alpha uncertainty

Figure 1.7 Portfolio specific volatility with alpha uncertainty and constraints on
systematic and specific risk.