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Quick takeaways
- Application of independent component analysis in financial time series for portfolio optimization.
- Optimization technique in LDI portfolios focuses on hedging large returns and minimizing extreme deviations.
Deep dives
Motivation for Introducing New Tools for Fat Tails Handling
The motivation for introducing a new tool for handling fat tails and extreme returns stemmed from encountering independent component analysis, used in separating signals. This led to considering its application in financial time series and exploring kurtosis-based portfolio optimization. Insights from prior work highlighted an approach bridging CAPM and market practice, evolving into continuous parameterized portfolio allocations.
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