Finance Whiz needed

Anyone studying finance, completed a degree, or working in the industry?

Got an assignment i need help on. Got one question regarding maximum drawdown that i'm having trouble with

What is the issue? I can try to help.

Assuming that the monthly returns of the asset classes are jointly normally distributed,design an asset allocation for your client that maximizes the expected monthly return of his superannuationfund,subject to the following two constraints:
•Diversification:Between 5% and 15% of the fund should be invested in each asset class. •Maximum drawdown:The probability of a monthly loss in excess of 1% should not exceed 10%.

That's the question, my issue is with the constraints I need to input for solver in excel, I have done the diversification constraints but I can't seem to get the drawdown constraint , would you have any idea?

I am assuming you have been taught normal distributions and standard normal distribution and calculating the cummulative probabilities related to it? There might be function in excel that allows you to calculate the cummulative probabilities related to standard normal distribution, i am not sure about that though.

I think what you need to do is to generate a mean and standard deviation for each possible combination of the asset classes given the constraint of 5-15% in each class. Then you need to use the -1% and the mean and the standard deviation of each combination (portfolio) of asset classes in the following form.

Z = (-0.01 - mean)/std deviation

Then use this number of find out the probability of returns coming below -1%. You should do P((x-mean)/std dev) and see that it is below 10% or alternatively find the Z value leaving a cummulative probability of 10% in the lower tail of the distribution and that value should be smaller than the Z-value you calculate with -1%.

I think this is the way to incorporate the second constraint.

Cheers got the answer didn't need and z-scores just used the norm.dist function , thanks for the help mate.