Preprint
Sep 2026
An Entropic Factor Model for Robust Portfolio Replication
Portfolio replication, or the construction of a tradable basket of assets to match the risk-return profile of a target benchmark, is fundamentally an ill-posed inverse problem. When restricted to a subset of available assets, classical variance-minimizing models often yield unstable, over-leveraged portfolios highly vu...
A. Arratia, Henryk Gzyl
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