Stochastic Portfolio Theory (SPT) is a mathematical framework used to analyze portfolio allocations and their performance in a probabilistic context. It combines elements of probability theory, stochastic processes, and financial modeling to understand how portfolios behave over time under uncertainty. The key aspects of SPT include: 1. **Stochastic Processes**: SPT treats asset prices and portfolio returns as stochastic processes, meaning they evolve randomly over time according to certain probabilistic rules.
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