Multi-Asset Investment Theory Based on Option Implied Marginal Return Distributions, Physical Dependency Modelling and Financial Finance Valuation Objectives

The multi-asset investment problem is designed to maximize a conservative …nancial valuation. Observing that conservative valuations are below mean returns, that are zero in present value terms for risk neutral distributions, it is then noted that the resulting investment problem is vacuous. Modeling risk neutral asset price processes by compound Poisson processes approximing continuity, leads to possibly positive mean returns for the sum of the next n price moves. The investment problem is recast in terms of the distribution of the sum of the next n moves. Marginal distributions for such returns are obtained from option price data. The joint distributions are modeled by invoking physical return dependencies. Conservative valuations are then formulated as a Financial Finance Valuation, a specialized form of a monetary utility. The resulting investment recommendations embedded into a strategy trading ten equity assets from the technology sector over the period January 2023 through November 2025. Five dependency models are reported on with the best performance being delivered by the Clayton and Frank copula models.