Modern Portfolio Theory (MPT) provides an elegant mathematical framework for the efficient portfolio allocation problem. Despite its exceptional popularity, MPT poses a number of well-documented problems in practical applications. Especially the fact that it generates notoriously extreme and...

While machine learning and its many variants are becoming established tools in quantitative finance, their application in a risk measurement context is less developed. This paper uses a scheme from probability theory and statistics – Gaussian Processes – and applies the corresponding...