Related papers: Optimal leverage from non-ergodicity
This paper investigates a time-inconsistent portfolio selection problem in the incomplete mar ket model, integrating expected utility maximization with risk control. The objective functional balances the expected utility and variance on log…
We study optimal portfolio choice under Epstein-Zin recursive utility in the presence of general leverage constraints. We first establish that the optimal value function is the unique viscosity solution to the associated…
Kelly criterion, that maximizes the expectation value of the logarithm of wealth for bookmaker bets, gives an advantage over different class of strategies. We use projective symmetries for a explanation of this fact. Kelly's approach allows…
We consider a utility-maximization problem in a general semimartingale financial model, subject to constraints on the number of shares held in each risky asset. These constraints are modeled by predictable convex-set-valued processes whose…
We study the problem of optimal long term portfolio selection with a view to beat a benchmark. Two kinds of objectives are considered. One concerns the probability of outperforming the benchmark and seeks either to minimise the decay rate…
A classical portfolio theory deals with finding the optimal proportion in which an agent invests a wealth in a risk-free asset and a probabilistic risky asset. Formulating and solving the problem depend on how the risk is represented and…
Kelly's Criterion is well known among gamblers and investors as a method for maximizing the returns one would expect to observe over long periods of betting or investing. These ideas are conspicuously absent from portfolio optimization…
In recent years, the evaluation of the minimal investment risk of the quenched disordered system of a portfolio optimization problem and the investment concentration of the optimal portfolio has been actively investigated using the analysis…
Portfolio optimization methods suffer from a catalogue of known problems, mainly due to the facts that pair correlations of asset returns are unstable, and that extremal risk measures such as maximum drawdown are difficult to predict due to…
We study an optimization problem for a portfolio with a risk-free, a liquid, and an illiquid risky asset. The illiquid risky asset is sold in an exogenous random moment with a prescribed liquidation time distribution. The investor prefers a…
A continuous-time financial portfolio selection model with expected utility maximization typically boils down to solving a (static) convex stochastic optimization problem in terms of the terminal wealth, with a budget constraint. In…
Stock portfolio optimization is the process of continuous reallocation of funds to a selection of stocks. This is a particularly well-suited problem for reinforcement learning, as daily rewards are compounding and objective functions may…
We consider an investor who seeks to maximize her expected utility derived from her terminal wealth relative to the maximum performance achieved over a fixed time horizon, and under a portfolio drawdown constraint, in a market with local…
Modern portfolio theory(MPT) addresses the problem of determining the optimum allocation of investment resources among a set of candidate assets. In the original mean-variance approach of Markowitz, volatility is taken as a proxy for risk,…
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…
We revisit the problem of portfolio selection, where an investor maximizes utility subject to a risk constraint. Our framework is very general and accommodates a wide range of utility and risk functionals, including non-concave utilities…
Models of adaptive bet-hedging commonly adopt insights from Kelly's famous work on optimal gambling strategies and the financial value of information. In particular, such models seek evolutionary solutions that maximize long term average…
In this paper we derive the exact solution of the multi-period portfolio choice problem for an exponential utility function under return predictability. It is assumed that the asset returns depend on predictable variables and that the joint…
We prove that the Omega measure, which considers all moments when assessing portfolio performance, is equivalent to the widely used Sharpe ratio under jointly elliptic distributions of returns. Portfolio optimization of the Sharpe ratio is…
We consider the economic problem of optimal consumption and investment with power utility. We study the optimal strategy as the relative risk aversion tends to infinity or to one. The convergence of the optimal consumption is obtained for…