While it is often argued that allocation decisions can be best expressed in terms of exposure to rewarded risk factors, as opposed to somewhat arbitrary asset class decompositions, the practical implications of this paradigm shift for the optimal design of the policy portfolio still remain...

We present a simple method to generate scenarios from multivariate elliptical distributions where the sample mean and covariances match the respective population moments. This methodology easily applies to large numbers of scenarios and large-dimensional distributions. We show an application to...

We introduce the multivariate Ornstein-Uhlenbeck and discuss how it generalizes a vast class of continuous-time and discrete-time multivariate processes. Relying on the simple geometrical interpretation of the dynamics of the Ornstein-Uhlenbeck process we introduce cointegration and its...

We propose a unified, fully general methodology to analyze and act on diversification in any environment, including long-short trades in highly correlated markets with complex derivatives. First, we build the diversification distribution, i.e. the distribution of the uncorrelated bets in the...

We propose a unified methodology to input non-linear views from any number of users in fully general non-normal markets, and perform, among others, stress-testing, scenario analysis, and ranking allocation. We walk the reader through the theory and we detail an extremely efficient algorithm to...

We draw on regression analysis to decompose volatility, VaR and expected shortfall into arbitrary combinations or aggregations of risk factors and we present a simple recipe to implement this approach in practice

We introduce Dynamic Entropy Pooling, a quantitative technique to perform dynamic portfolio construction with discretionary, non-synchronous views. With Dynamic Entropy Pooling, the portfolio manager can embed in the allocation process signals with life spans ranging from minutes to years,...

We introduce a simple approach to managing portfolio interest rate risk that is consistent and performs well across different interest rate regimes, including when interest rates are low or even negative. Inspired by Black (1995), this approach uses a novel inverse-call transformation...

Exercises and case studies for a rigorous approach to risk- and portfolio-management. This booklet stems from the review sessions of the six-day ARPM bootcamp.Contents include:Advanced multivariate statistics; copula-marginal decompositionAnnualization/projection (FFT, cumulants,...

The Entropy Pooling approach is a versatile theoretical framework to process market views and generalized stress-tests into an optimal "posterior" market distribution, which is then used for risk management and portfolio management. Entropy Pooling can be implemented non-parametrically or...