The thrust of this paper is to develop a new theoretical framework, based on large deviations theory, for the problem of optimal asset allocation in large portfolios. This problem is, apart from being theoretically interesting, also of practical relevance; examples include, inter alia, hedge funds...

We develop a new method to approximate the asymmetric multivariate probability density function (pdf) of financial asset returns by using series expansions; a rate of convergence for the mean absolute error of this approximation is also provided. We then propose the method of maximum likelihood...