Related papers: Feasibility of Portfolio Optimization under Cohere…

Measures of risk concentration and their asymptotic behavior for portfolios with heavy-tailed risk factors is of interest in risk management. Second order regular variation is a structural assumption often imposed on such risk factors to…

This paper is concerned with a simulation study for a stochastic production network model, where the capacities of machines may change randomly. We introduce performance measures motivated by risk measures from finance leading to a…

Markowitz's celebrated mean--variance portfolio optimization theory assumes that the means and covariances of the underlying asset returns are known. In practice, they are unknown and have to be estimated from historical data. Plugging the…

We consider the problem of optimizing a portfolio of financial assets, where the number of assets can be much larger than the number of observations. The optimal portfolio weights require estimating the inverse covariance matrix of excess…

Common asset holdings are widely believed to have been the primary vector of contagion in the recent financial crisis. We develop a network approach to the amplification of financial contagion due to the combination of overlapping…

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 introduce and study the main properties of a class of convex risk measures that refine Expected Shortfall by simultaneously controlling the expected losses associated with different portions of the tail distribution. The corresponding…

Robust estimation for modern portfolio selection on a large set of assets becomes more important due to large deviation of empirical inference on big data. We propose a distributionally robust methodology for high-dimensional mean-variance…

We develop a finite horizon continuous time market model, where risk averse investors maximize utility from terminal wealth by dynamically investing in a risk-free money market account, a stock written on a default-free dividend process,…

We obtain a lower asymptotic bound on the decay rate of the probability of a portfolio's underperformance against a benchmark over a large time horizon. It is assumed that the prices of the securities are governed by geometric Brownian…

The estimation of risk measures recently gained a lot of attention, partly because of the backtesting issues of expected shortfall related to elicitability. In this work we shed a new and fundamental light on optimal estimation procedures…

This paper investigates performance attribution measures as a basis for constraining portfolio optimization. We employ optimizations that minimize expected tail loss and investigate both asset allocation (AA) and the selection effect (SE)…

A phase transition in high-dimensional random geometry is analyzed as it arises in a variety of problems. A prominent example is the feasibility of a minimax problem that represents the extremal case of a class of financial risk measures,…

A solution to a portfolio optimization problem is always conditioned by constraints on the initial capital and the price of the available market assets. If a risk neutral measure is known, then the price of each asset is the discounted…

We establish sharp upper and lower bounds for distortion risk metrics under distributional uncertainty. The uncertainty sets are characterized by four key features of the underlying distribution: mean, variance, unimodality, and Wasserstein…

Mean-deviation models, along with the existing theory of coherent risk measures, are well studied in the literature. In this paper, we characterize monotonic mean-deviation (risk) measures from a general mean-deviation model by applying a…

We establish structural properties of optimal stopping problems under time-consistent dynamic (coherent) risk measures, focusing on value function monotonicity and the existence of control limit (threshold) optimal policies. While such…

When the planning horizon is long, and the safe asset grows indefinitely, isoelastic portfolios are nearly optimal for investors who are close to isoelastic for high wealth, and not too risk averse for low wealth. We prove this result in a…

The risk of a credit portfolio depends crucially on correlations between the probability of default (PD) in different economic sectors. Often, PD correlations have to be estimated from relatively short time series of default rates, and the…

In this paper, we investigate the features and the performance of the Risk Parity (RP) portfolios using the Mean Absolute Deviation (MAD) as a risk measure. The RP model is a recent strategy for asset allocation that aims at equally sharing…