Related papers: Analysis of Kelly-optimal portfolios
In stochastic finance, one traditionally considers the return as a competitive measure of an asset, {\it i.e.}, the profit generated by that asset after some fixed time span $\Delta t$, say one week or one year. This measures how well (or…
We study the Markowitz portfolio selection problem with unknown drift vector in the multidimensional framework. The prior belief on the uncertain expected rate of return is modeled by an arbitrary probability law, and a Bayesian approach…
This article examines arbitrage investment in a mispriced asset when the mispricing follows the Ornstein-Uhlenbeck process and a credit-constrained investor maximizes a generalization of the Kelly criterion. The optimal differentiable and…
This paper studies the mean-variance optimal portfolio choice of an investor pre-committed to a deterministic investment policy in continuous time in a market with mean-reversion in the risk-free rate and the equity risk-premium. In the…
In portfolio optimization problems, the minimum expected investment risk is not always smaller than the expected minimal investment risk. That is, using a well-known approach from operations research, it is possible to derive a strategy…
Several portfolio selection models take into account practical limitations on the number of assets to include and on their weights in the portfolio. We present here a study of the Limited Asset Markowitz (LAM), of the Limited Asset Mean…
This paper examines an optimal investment problem in a continuous-time (essentially) complete financial market with a finite horizon. We deal with an investor who behaves consistently with principles of Cumulative Prospect Theory, and whose…
We propose a novel method to improve estimation of asset returns for portfolio optimization. This approach first performs a monthly directional market forecast using an online decision tree. The decision tree is trained on a novel set of…
In this paper, we consider the portfolio optimization problem in a financial market under a general utility function. Empirical results suggest that if a significant market fluctuation occurs, invested wealth tends to have a notable change…
This paper studies an optimal investing problem for a retiree facing longevity risk and living standard risk. We formulate the investing problem as a portfolio choice problem under a time-varying risk capacity constraint. We derive the…
We consider a single-period portfolio selection problem for an investor, maximizing the expected ratio of the portfolio utility and the utility of a best asset taken in hindsight. The decision rules are based on the history of stock returns…
Based on the theory of c\`adl\`ag rough paths, we develop a pathwise approach to analyze stability and approximation properties of portfolios along individual price trajectories generated by standard models of financial markets. As a…
Continuous-time mean-variance portfolio selection model with nonlinear wealth equations and bankruptcy prohibition is investigated by the dual method. A necessary and sufficient condition which the optimal terminal wealth satisfies is…
Portfolio optimization is a fundamental challenge in quantitative finance, requiring robust computational tools that integrate statistical rigor with practical implementation. We present skfolio, an open-source Python library for portfolio…
We provide analytical results for a static portfolio optimization problem with two coherent risk measures. The use of two risk measures is motivated by joint decision-making for portfolio selection where the risk perception of the portfolio…
In this paper, as a first step in examining the properties of a feasible portfolio subset that is characterized by budget and risk constraints, we assess the maximum and minimum of the investment concentration using replica analysis. To do…
In this paper, we investigate the Merton portfolio management problem in the context of non-exponential discounting. This gives rise to time-inconsistency of the decision-maker. If the decision-maker at time t=0 can commit his/her…
This article deals with the problem of optimal allocation of capital to corporate bonds in fixed income portfolios when there is the possibility of correlated defaults. Under fairly general assumptions for the distribution of the total net…
We study a continuous-time Markowitz mean-variance portfolio selection model in which a naive agent, unaware of the underlying time-inconsistency, continuously reoptimizes over time. We define the resulting naive policies through the limit…
It is shown that the axioms for coherent risk measures imply that whenever there is an asset in a portfolio that dominates the others in a given sample (which happens with finite probability even for large samples), then this portfolio…