Stochastic Portfolio Theory

Shastic portfolio theory is a mathematical methodology for constructing sk portfolios, analyzing the behavior of portfolios, and understanding the structure of equity markets. Shastic portfolio theory has both theoretical and practical applications: as a theoretical tool it can be used to construct examples of theoretical portfolios with specified characteristics, and to determine the distributional component of portfolio return. On a practical level, shastic portfolio theory has been the basis for strategies used for over a decade by the institutional equity manager INTECH, where the author has served as chief investment officer. This book is an introduction to shastic portfolio theory for investment professionals and for students of mathematical finance. Each chapter includes a number of problems of varying levels of difficulty and a brief summary of the principal results of the chapter, without proofs.