Related papers: Optimal leverage from non-ergodicity
This paper discusses the sensitivity of the long-term expected utility of optimal portfolios for an investor with constant relative risk aversion. Under an incomplete market given by a factor model, we consider the utility maximization…
Classical mean-variance portfolio theory tells us how to construct a portfolio of assets which has the greatest expected return for a given level of return volatility. Utility theory then allows an investor to choose the point along this…
Random features provide a practical framework for large-scale kernel approximation and supervised learning. It has been shown that data-dependent sampling of random features using leverage scores can significantly reduce the number of…
One popular method for dealing with large-scale data sets is sampling. For example, by using the empirical statistical leverage scores as an importance sampling distribution, the method of algorithmic leveraging samples and rescales…
We consider a reference security, understood to be an attractive investment, with the caveat that an investor is not willing to directly invest in the security, for presence of constraints, either investor specific or pertaining to the…
Management of a portfolio that includes an illiquid asset is an important problem of modern mathematical finance. One of the ways to model illiquidity among others is to build an optimization problem and assume that one of the assets in a…
The Sharpe ratio is an important and widely-used risk-adjusted return in financial engineering. In modern portfolio management, one may require an m-sparse (no more than m active assets) portfolio to save managerial and financial costs.…
Omega ratio, defined as the probability-weighted ratio of gains over losses at a given level of expected return, has been advocated as a better performance indicator compared to Sharpe and Sortino ratio as it depends on the full return…
Shapley data valuation provides a principled, axiomatic framework for assigning importance to individual datapoints, and has gained traction in dataset curation, pruning, and pricing. However, it is a combinatorial measure that requires…
This paper studies a continuous-time optimal portfolio selection problem in the complete market for a behavioral investor whose preference is of the prospect type with probability distortion. The investor concerns about the terminal…
This paper addresses the portfolio selection problem for nonlinear law-dependent preferences in continuous time, which inherently exhibit time inconsistency. Employing the method of stochastic maximum principle, we establish verification…
We consider games of chance played by someone with external capital that cannot be applied to the game and determine how this affects risk-adjusted optimal betting. Specifically, we focus on Kelly optimization as a metric, optimizing the…
This paper considers a utility maximization and optimal asset allocation problem in the presence of a stochastic endowment that cannot be fully hedged through trading in the financial market. After studying continuity properties of the…
This paper studies the long-term growth rate of expected utility from holding a leveraged exchanged-traded fund (LETF), which is a constant proportion portfolio of the reference asset. Working with the power utility function, we develop an…
We study whether a risk-sensitive objective from asset-pricing theory -- recursive utility -- improves reinforcement learning for portfolio allocation. The Bellman equation under recursive utility involves a certainty equivalent (CE) of…
We consider optimal consumption and portfolio choice in the presence of Knightian uncertainty in continuous-time. We embed the problem into the new framework of stochastic calculus for such settings, dealing in particular with the issue of…
The standard approach for constructing a Mean-Variance portfolio involves estimating parameters for the model using collected samples. However, since the distribution of future data may not resemble that of the training set, the…
We consider non-concave and non-smooth random utility functions with do- main of definition equal to the non-negative half-line. We use a dynamic pro- gramming framework together with measurable selection arguments to establish both the…
Financial portfolio management is one of the problems that are most frequently encountered in the investment industry. Nevertheless, it is not widely recognized that both Kelly Criterion and Risk Parity collapse into Mean Variance under…
Traditional risk-adjusted returns, such as the Treynor, Sharpe, Sortino, and Information ratios, have been pivotal in portfolio asset allocation, focusing on minimizing risk while maximizing profit. Nevertheless, these metrics often fail to…