Markov decision models (MDM) used in practical applications are most often less complex than the underlying ‘true’ MDM. The reduction of model complexity is performed for several reasons. However, it is obviously of interest to know what kind of model reduction is reasonable (in regard to...

We derive no-arbitrage bounds for expected excess returns to generate scenarios used in financial applications. The bounds allow to distinguish three regions: one where arbitrage opportunities will never exist, a second where arbitrage may be present, and a third, where arbitrage opportunities...

Long-term investors can markedly improve their investment performance by incorporating specialized 'overlay' securities/strategies in conjunction with widely diversified and leveraged multi-stage portfolios. The overlays require no dedicated capital beyond the core portfolio, providing higher...