by Igor Evstigneev, Klaus Reiner Schenk-Hoppé, Thorsten Hens
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Suggested foundations for portfolio construction and stochastic processes and pricing. Specialist prerequisites vary by paper.
Understand the covariance structure of portfolio risk.
Read objectives, constraints and optimality conditions.
Understand what it means to condition on current information.
Follow Brownian dynamics and the second-order term in Itô calculus.
Construct allocations and examine sensitivity to estimated inputs.
Turn mathematical weights into feasible portfolio decisions.
Connect stochastic dynamics to no-arbitrage prices.
Connect diversification, common risk factors, investor views, and the properties of a risk measure.
Start in discrete time, move to Brownian motion, then read the original pricing argument and simulate it.