Portfolio risk and the quantum majorization of correlation matrices
Andrea Fontanari
Iddo Eliazar
Pasquale Cirillo
C.W. Oosterlee (TU Delft - Electrical Engineering, Mathematics and Computer Science)
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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.