There’s a reason Wall Street firms recruit from MIT. For many investors, the financial markets are governed entirely by mathematical equations applied to aspects of a security’s price and trading ...

We had our first taste of the problem with mean-variance optimization at a hedge fund some years back. We loaded the positions into an optimizer, pressed the button, and discovered 25% of the ...

We were visiting a hedge fund some years back when we had our first taste of the problem with mean-variance optimization—the tool advisors use to balance risk and reward in client portfolios. We ...

(a) in the limit of low uncertainty in estimated asset mean returns, the robust portfolio converges toward the mean-variance portfolio obtained with the same inputs, and (b) in the limit of high ...

We formulate a novel Markov regime-switching factor model to describe the cyclical nature of asset returns in modern financial markets. Maintaining a factor model structure allows us to easily derive ...

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and ...