Related papers: Analysis of Kelly-optimal portfolios
We study the problem of optimal portfolio selection in an illiquid market with discrete order flow. In this market, bids and offers are not available at any time but trading occurs more frequently near a terminal horizon. The investor can…
This paper develops a method to derive optimal portfolios and risk premia explicitly in a general diffusion model for an investor with power utility and a long horizon. The market has several risky assets and is potentially incomplete.…
We treat a discrete-time asset allocation problem in an arbitrage-free, generically incomplete financial market, where the investor has a possibly non-concave utility function and wealth is restricted to remain non-negative. Under easily…
A fractal approach to the long-short portfolio optimization is proposed. The algorithmic system based on the composition of market-neutral spreads into a single entity was considered. The core of the optimization scheme is a fractal walk…
We study the design of portfolios under a minimum risk criterion. The performance of the optimized portfolio relies on the accuracy of the estimated covariance matrix of the portfolio asset returns. For large portfolios, the number of…
This paper derives a portfolio decomposition formula when the agent maximizes utility of her wealth at some finite planning horizon. The financial market is complete and consists of multiple risky assets (stocks) plus a risk free asset. The…
In this paper, both dynamic mean-variance portfolio selection problems and dynamic variance hedging problems are discussed under non-Markovian framework. Explicit closed-loop equilibrium strategies of these problems are respectively…
Portfolio optimization methods have evolved significantly since Markowitz introduced the mean-variance framework in 1952. While the theoretical appeal of this approach is undeniable, its practical implementation poses important challenges,…
The existing approaches to sparse wealth allocations (1) are limited to low-dimensional setup when the number of assets is less than the sample size; (2) lack theoretical analysis of sparse wealth allocations and their impact on portfolio…
We consider the investor who doesn't trade shares of his portfolio. The investor only observes the current trades made in the market with his securities to estimate the current return, variance, and risks of his unchanged portfolio. We show…
This paper studies a continuous-time market {under stochastic environment} where an agent, having specified an investment horizon and a target terminal mean return, seeks to minimize the variance of the return with multiple stocks and a…
We study the finite mutually exclusive outcome version of risk-constrained Kelly optimization with explicit state prices. The market has outcome probabilities $p_i>0$, state prices $q_i>0$, terminal wealths $W_i=c+x_i/q_i$, and a…
We introduce a generic solver for dynamic portfolio allocation problems when the market exhibits return predictability, price impact and partial observability. We assume that the price modeling can be encoded into a linear state-space and…
We consider an optimal consumption/investment problem to maximize expected utility from consumption. In this market model, the investor is allowed to choose a portfolio which consists of one bond, one liquid risky asset (no transaction…
This paper investigates the investment problem of constructing an optimal no-short sequential portfolio strategy in a market with a latent dependence structure between asset prices and partly unobservable side information, which is often…
Selecting the optimal Markowitz porfolio depends on estimating the covariance matrix of the returns of $N$ assets from $T$ periods of historical data. Problematically, $N$ is typically of the same order as $T$, which makes the sample…
We introduce a solution scheme for portfolio optimization problems with cardinality constraints. Typical portfolio optimization problems are extensions of the classical Markowitz mean-variance portfolio optimization model. We solve such…
The paper provides a mathematical model and a tool for the focused investing strategy as advocated by Buffett, Munger, and others from this investment community. The approach presented here assumes that the investor's role is to think about…
Growth-optimal portfolios are guaranteed to accumulate higher wealth than any other investment strategy in the long run. However, they tend to be risky in the short term. For serially uncorrelated markets, similar portfolios with more…
The asymptotic distribution of the Markowitz portfolio is derived, for the general case (assuming fourth moments of returns exist), and for the case of multivariate normal returns. The derivation allows for inference which is robust to…