[surfpel]

> There is some very interesting and fun maths involved in this process that is beyond the scope of general investing.

Are there some search terms or resources you would recommend looking into to learn more about this fun maths?

[scoofy]

Nassim Taleb's academic papers are all about the fun math of risk-management. He basically invented the barbell/butterfly strategy which is effectively a "normal distribution risk profile" to "students t distribution risk profile" arbitrage, where you are making a big bet that the market underestimates both the downside risk and upside rewards of equities in general.

Very bizarre strategy, but really, really interesting.

[UnpossibleJim]

Awesome! Thank you!

[FabHK]

Look at the CAPM for the financial content, and mean-variance optimisation for the maths. It's basically minimising a quadratic function, but in many dimensions, with two constraints - the efficient frontier. You use Lagrange multipliers and arrive at a neat linear system.

Lots of fun parabolas and hyperbolas :-)

[UnpossibleJim]

Awesome! Thank you!