In June 2020, Robert Fernholz spoke with members of the Journal of Investment Consulting’s editorial advisory board about stochastic portfolio theory, its contributions to the investment industry’s knowledge of equity markets, and its applicability to creating and monitoring investment...

The use of a deterministic numeric paradigm in auditing and accounting may well be the root cause of many current problems. This paper argues that risk-based accounting methods should start using probabilistic inputs which would show resultant distributions as output. “Stochastic accounting”...

Covariance appears throughout investment management, e.g., in risk reporting and control, portfolio construction, risk parity, smart beta, algorithmic trading, and hedging. It is usually represented via multi-factor model. The form’s fewer parameters and structure—comovement through...

Derivatives, especially equity and volatility options, contain valuable and oftentimes essential information for estimating stochastic volatility models. Absent strong assumptions, their typically highly nonlinear pricing dependence on the state vector prevents or at least severely impedes their...

The paper introduces a simple way of recording and manipulating general stochastic processes without explicit reference to a probability measure. In the new calculus, operations traditionally presented in a measure-specific way are instead captured by tracing the behaviour of jumps (also when no...