Financial Applications of Random Matrix Theory: a short review

J.P. Bouchaud; M. Potters

arxiv: 0910.1205 · v1 · submitted 2009-10-07 · 💱 q-fin.ST · cond-mat.dis-nn· q-fin.RM

Financial Applications of Random Matrix Theory: a short review

J.P. Bouchaud , M. Potters This is my paper

classification 💱 q-fin.ST cond-mat.dis-nnq-fin.RM

keywords applicationsrandomfinancialmatrixtheoryvariousbeenconcrete

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We discuss the applications of Random Matrix Theory in the context of financial markets and econometric models, a topic about which a considerable number of papers have been devoted to in the last decade. This mini-review is intended to guide the reader through various theoretical results (the Marcenko-Pastur spectrum and its various generalisations, random SVD, free matrices, largest eigenvalue statistics, etc.) as well as some concrete applications to portfolio optimisation and out-of-sample risk estimation.

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