Related papers: Risk Aversion and Portfolio Selection in a Continu…
To achieve robustness of risk across different assets, risk parity investing rules, a particular state of risk contributions, have grown in popularity over the previous few decades. To generalize the concept of risk contribution from the…
We consider a liquidation problem in which a risk-averse trader tries to liquidate a fixed quantity of an asset in the presence of market impact and random price fluctuations. The trader encounters a trade-off between the transaction costs…
Motivated by recent axiomatic developments, we study the risk- and ambiguity-averse investment problem where trading takes place over a fixed finite horizon and terminal payoffs are evaluated according to a criterion defined in terms of a…
We study the performance of various agent strategies in an artificial investment scenario. Agents are equipped with a budget, $x(t)$, and at each time step invest a particular fraction, $q(t)$, of their budget. The return on investment…
An investor with constant relative risk aversion and an infinite planning horizon trades a risky and a safe asset with constant investment opportunities, in the presence of small transaction costs and a binding exogenous portfolio…
In this paper the utility optimization problem for a general insurance model is studied. The reserve process of the insurance company is described by a stochastic differential equation driven by a Brownian motion and a Poisson random…
We study continuous-time mean--variance portfolio selection in markets where stock prices are diffusion processes driven by observable factors that are also diffusion processes, yet the coefficients of these processes are unknown. Based on…
We study the problem of maximising terminal utility for an agent facing model uncertainty, in a frictionless discrete-time market with one safe asset and finitely many risky assets. We show that an optimal investment strategy exists if 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…
In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the…
We consider a market consisting of one safe and one risky asset, which offer constant investment opportunities. Taking into account both proportional transaction costs and linear price impact, we derive optimal rebalancing policies for…
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…
We derive new results related to the portfolio choice problem for power and logarithmic utilities. Assuming that the portfolio returns follow an approximate log-normal distribution, the closed-form expressions of the optimal portfolio…
I introduce novel preference formulations which capture aversion to ambiguity about unknown and potentially time-varying volatility. I compare these preferences with Gilboa and Schmeidler's maxmin expected utility as well as variational…
We treat a fairly broad class of financial models which includes markets with proportional transaction costs. We consider an investor with cumulative prospect theory preferences and a non-negativity constraint on portfolio wealth. The…
In a discrete-time financial market model with instantaneous price impact, we find an asymptotically optimal strategy for an investor maximizing her expected wealth. The asset price is assumed to follow a process with negative memory. We…
Dynamic portfolio optimization is the process of sequentially allocating wealth to a collection of assets in some consecutive trading periods, based on investors' return-risk profile. Automating this process with machine learning remains a…
For an investor with constant absolute risk aversion and a long horizon, who trades in a market with constant investment opportunities and small proportional transaction costs, we obtain explicitly the optimal investment policy, its implied…
We consider the estimation of the multi-period optimal portfolio obtained by maximizing an exponential utility. Employing Jeffreys' non-informative prior and the conjugate informative prior, we derive stochastic representations for the…
Diversification represents the idea of choosing variety over uniformity. Within the theory of choice, desirability of diversification is axiomatized as preference for a convex combination of choices that are equivalently ranked. This…