From optimal rebalancing to information geometry by Leonard Wong

Event Date: 

Monday, April 17, 2017 -
3:30pm to 5:00pm

Event Date Details: 

Refreshments served at 3:15 p.m

Event Location: 

  • South Hall 5607F

Leonard Wong — USC

Title: From optimal rebalancing to information geometry

Abstract: What is the optimal frequency to rebalance a portfolio? For the class of functionally generated portfolios in stochastic portfolio theory, we show that the answer is given in terms of a "dualistic" Pythagorean theorem. Along the way, we establish fascinating connections with optimal transport and information geometry - the differential geometry of probability distributions. A key role is played by the concept of L-divergence which generalizes the diversification return or excess growth rate of a portfolio. Our results extend the classical information geometry of Bregman divergence developed by Amari and others. This is joint work with Soumik Pal.