This blog is really discussing the technology of Asset Allocation, and hopefully some on the topic of the asset allocation process. I will not be discussing potential asset allocations.

Most recently I began to work on building some programs to perform portfolio optimization using CVaR, Conditional Value at Risk as the objective function. This requires a linear optimization algorithm, which I don't currently have in my toolbox. Someplace along the way of building this linear optimizer I ran into the topic of Random Matrix Theory.

Econophysics, it always draws me in. I think it's because of my Physics background, and how appealing their approaches are. Entropy is another Econophysics concept that I've spent some time looking at, but it hasn't added up to much in terms of portfolio optimization yet.

As far as Random Matrix Theory it also seems interesting, and it's not to difficult to figure out which part of the correlation matrix appears to be noisy, but it is somewhat complex to put the updated correlation matrix back together. While there are many papers on the topic, they don't usually provide a lot of information on re-assembling the correlation matrix. I'm hoping to make some progress in this direction at some point myself.

In the meantime I'm back working on my linear least squares optimizer. I was trying to work with the augmented form of the equations, but so far I have some errors in my math as my matrices are singular. Ouch.