Portfolio risk and the quantum majorization of correlation matrices. (2nd June 2020)

• Record Type: Journal Article
• Authors: Fontanari, Andrea; Eliazar, Iddo; Cirillo, Pasquale; Oosterlee, Cornelis W
• Is Part Of: IMA journal of management mathematics. Volume 32:Number 3(2021)
• Page Start: 257
• Page End: 282
• Publication Date: 2020-06-02
• Subjects: majorization -- correlation matrix -- portfolio risk; Management -- Mathematical models -- Periodicals; Management science -- Mathematical models -- Periodicals; Business mathematics -- Periodicals; 650.01513
• DOI: 10.1093/imaman/dpaa011
• Languages: English
• ISSNs: 1471-678X

Abstract

Abstract: We propose quantum majorization as a way of comparing and ranking correlation matrices, with the aim of assessing portfolio risk in a unified framework. Quantum majorization is a partial order in the space of correlation matrices, which are evaluated through their spectra. We discuss the connections between quantum majorization and an important class of risk functionals, and we define two new risk measures able to capture interesting characteristics of portfolio risk.