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Bayesian Stability Concepts for Investment Managers


Diethelm Würtz, Tobias Setz
Rmetrics eBooks 2014
Rmetrics Association and Finance Online Publishing, Zurich

ISBN: 978-3-906041-21-6

About the Book:

The eBook reprints several unpublished articles and reports from the Econophysics Group at ETH Zurich.The articles show how Bayesian stability concepts and related approaches can be used by investment managers to analyse their portfolio design and to improve performance and risk management. The book is devided into two parts. The first contains three Chapters about the theoretical background, and the second contains six Chapters with applications. The applications include topics from rating and ranking assets by stability, from stability parity indexation, from Bayesian switching strategies, from stabilization of portfolios, and from sector rotation. (Note: Chapter 7 and 8 are written in German).

About the Authors:

Diethelm Würtz is Professor at the “Swiss Federal Institute of Technology” (ETH) in Zurich. Diethelm is teaching regular ETH lectures and seminars in Computational Finance and Financial Engineering. He is involved in the organization of the “Rmetrics Summer Schools” and in several international workshops, courses and meetings in Europe and Asia. He is President of the Open Source “Rmetrics Association”, Senior Partner of “Finance Online GmbH” and Co-Founder of “Sidenis AG” in Zurich. 

Tobias Setz holds a master in Computational Science and Engineering from ETH in Zurich with a major specialization in theoretical physics and a minor specialization in financial engineering. Currently he is doing his PhD in the Econophysics group of Prof Diethelm Würtz. In his theses he focused on stability indicators to describe the condition of financial or economic markets or to improve trading strategies. Besides this academic work, he is also a developer of the R/Rmetrics packages covering time series analysis and portfolio optimization (

Table of Contents: Download extract


Theoretical Background

Vulnerabilities in Time Serie
Bayesian Change Poin Analysis
Stability in a Nutshell


Rating and Ranking B Stability
Stability Parity Indexation
Bayesian Switching Strategies
Stabilization of Portfolios
Sector Rotation and Equities
Forward and Spot Fxmarkets