Functionally Generated Portfolios

  • E. Robert Fernholz
Part of the Applications of Mathematics book series (SMAP, volume 48)


Functionally generated portfolios are a generalization of the entropy-weighted portfolio defined in Section 2.3. In this chapter we show that a broad range of functions can be used to generate portfolios, and for functionally generated portfolios, a decomposition of the relative return analogous to that of the entropy-weighted portfolio in Theorem 2.3.4 remains valid. Theorem 2.3.4 is a prototype for the general results we present here.


Option Price Entropy Function Market Portfolio Arbitrage Opportunity Weak Diversity 
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Copyright information

© Springer Science+Business Media New York 2002

Authors and Affiliations

  • E. Robert Fernholz
    • 1
  1. 1.INTECHPrincetonUSA

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