Generalizations of Functionally Generated Portfolios with Applications to Statistical Arbitrage
Generalizations of Functionally Generated Portfolios with Applications to Statistical Arbitrage
The theory of functionally generated portfolios (FGPs) is an aspect of the continuous-time, continuous-path stochastic portfolio theory of E. R. Fernholz. FGPs have been formulated to yield a master equation---a description of their return relative to a passive (buy-and-hold) benchmark portfolio serving as the numéraire. This description has proved to …