Optimal rebalancing: tolerance bands approach (Excel)

Rebalancing bands or tolerance bands are a popular technique for traders and portfolio managers to determine when to rebalance a portfolio. Today we are simulating portfolio rebalancing with bands and discussing the concepts and the tradeoffs involved in determining the optimal width of these bands.
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[@NEDLeducation]

You can find the spreadsheets for this video and some additional materials here: drive.google.com/drive/folders/1sP40IW0p0w5IETCgo464uhDFfdyR6rh7
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[@riccardoronco627]

Big thank you

[@Amadeus13]

Thank you so much to sharing this video and the sheets too

[@stephenbatman8115]

Hello, and thank you for your channel. I have learned a lot and applied it to my work as an analyst. Question - why does your deviation column "O" only take the maximum of the deviations between position weight and target rather than a reference table for deviations for every position weight and target? Thank you in advance.

[@Amadeus13]

Hello, can you tell me the formula to calculate risk for each years? because i use 3 years for the data so i want to see the standard deviation for each years. I hope you can reply this, thank you

[@NEDLeducation]

Hi Amadeus, and thanks for the question! You could simply calculate the standard deviation for three separate ranges of cells and annualise the same way - multiplying it by SQRT(252).

[@Amadeus13]

Thank you so much for the answer😄

[@breezefor5966]

Hi,
Thank you so much for all the information :)
How would I have to modify the model if I wanted to rebalance lets say every year (so time based instead of the tolerance bads approach)?
( I couldnt find a Video from you covering that so I thought I just ask :))

[@NEDLeducation]

Hi, and glad you enjoyed the video! Here is the video on rebalancing frequency: ruclips.net/video/-qRmFmdeXYo/видео.html

[@Amadeus13]

Hello im from Indonesia. Thank you to share this video. Its really helpfull for me. Btw, i have a question. How to rebalance at a certain time? I want to try rebalancing when there are issues that affect shares (macro economics). I hope you can reply this because i have some issue to finished my thesis. Thank you, im sorry if my english bad 😊