title: Quantitative Portfolio Optimisation, Asset Allocation and Risk Management: A Practical Guide to Implementing Quantitative Investment Theory (Finance and Capital Markets Series)
author: M. Rasmussen
description: MIKKEL RASMUSSEN has an MSc in Economics and has worked both as a risk management consultant and equity portfolio manager. He currently manages Japanese equities at AEGON Asset Management in the Netherlands.
zlib_text: mathematics
  Article
  TPLVM: Portfolio Construction by Student’s t-Process
  Latent Variable Model
  Yusuke Uchiyama 1,∗
  and Kei Nakagawa 2
  1
  MAZIN Inc., 3-29-14 Nishi-Asakusa, Taito city, Tokyo 111-0035 Japan
  2
  NOMURA Asset Management Co. Ltd., 1-12-1 Nihonbashi, Chuo City, Tokyo 103-8260 Japan;
  kei.nak.0315@gmail.com
  *
  Correspondence: uchiyama@mazin.tech
  Received: 29 January 2020; Accepted: 12 March 2020; Published: 19 March 2020
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  Abstract: Optimal asset allocation is a key topic in modern ﬁnance theory. To realize the optimal asset
  allocation on investor’s risk aversion, various portfolio construction methods have been proposed.
  Recently, the applications of machine learning are rapidly growing in the area of ﬁnance. In this
  article, we propose the Student’s t-process latent variable model (TPLVM) to describe non-Gaussian
  ﬂuctuations of ﬁnancial timeseries by lower dimensional latent variables. Subsequently, we apply
  the TPLVM to portfolio construction as an alternative 