Thurstone Portfolio Polishing: Tail-Sensitive Black–Litterman and Beyond · Peter Cotton
Long-only allocation as the winning probabilities of a correlated race.
Abilities calibrate the race to a benchmark; the tilt re-runs it under the estimated dependence, so the portfolio is a controlled perturbation of the benchmark. It is free of the duplication paradox, tail-consistent when the race is driven by a downside-dependent simulation, and solves an implied convex-regularizer objective with a smoothness (low-turnover) bound. Built on the thurstone package.