Instruct: Identify the main and secondary category of Arxiv papers based on the titles and abstracts
Query: Leptokurtic Portfolio Theory   The question of optimal portfolio is addressed. The conventional Markowitz
portfolio optimisation is discussed and the shortcomings due to non-Gaussian
security returns are outlined. A method is proposed to minimise the likelihood
of extreme non-Gaussian drawdowns of the portfolio value. The theory is called
Leptokurtic, because it minimises the effects from "fat tails" of returns. The
leptokurtic portfolio theory provides an optimal portfolio for investors, who
define their risk-aversion as unwillingness to experience sharp drawdowns in
asset prices. Two types of risks in asset returns are defined: a fluctuation
risk, that has Gaussian distribution, and a drawdown risk, that deals with
distribution tails. These risks are quantitatively measured by defining the
"noise kernel" -- an ellipsoidal cloud of points in the space of asset returns.
The size of the ellipse is controlled with the threshold parameter: the larger
the threshold parameter, the larger return are accepted for investors as normal
fluctuations. The return vectors falling into the kernel are used for
calculation of fluctuation risk. Analogously, the data points falling outside
the kernel are used for the calculation of drawdown risks. As a result the
portfolio optimisation problem becomes three-dimensional: in addition to the
return, there are two types of risks involved. Optimal portfolio for
drawdown-averse investors is the portfolio minimising variance outside the
noise kernel. The theory has been tested with MSCI North America, Europe and
Pacific total return stock indices.

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The categories of this paper are: atom-ph
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The categories of this paper are: ao-sci
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The categories of this paper are: quant-ph
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The categories of this paper are: eess
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The categories of this paper are: hep-ex
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The categories of this paper are: solv-int
0
The categories of this paper are: hep-ph
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The categories of this paper are: nucl-ex
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The categories of this paper are: acc-phys
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The categories of this paper are: cmp-lg
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The categories of this paper are: mtrl-th
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The categories of this paper are: nlin
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The categories of this paper are: cs
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The categories of this paper are: supr-con
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The categories of this paper are: funct-an
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The categories of this paper are: gr-qc