Related papers: Portfolio optimization when expected stock returns…
Empirical studies indicate the presence of multi-scales in the volatility of underlying assets: a fast-scale on the order of days and a slow-scale on the order of months. In our previous works, we have studied the portfolio optimization…
We consider a portfolio optimization problem in a defaultable market with finitely-many economical regimes, where the investor can dynamically allocate her wealth among a defaultable bond, a stock, and a money market account. The market…
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…
Markowitz's criterion aims to balance expected return and risk when optimizing the portfolio. The expected return level is usually fixed according to the risk appetite of an investor, then the risk is minimized at this fixed return level.…
We present a robust version of the life-cycle optimal portfolio choice problem in the presence of labor income, as introduced in Biffis, Gozzi and Prosdocimi ("Optimal portfolio choice with path dependent labor income: the infinite horizon…
We introduce a price impact model which accounts for finite market depth, tightness and resilience. Its coupled bid- and ask-price dynamics induce convex liquidity costs. We provide existence of an optimal solution to the classical problem…
Stock price prediction is a challenging task and a lot of propositions exist in the literature in this area. Portfolio construction is a process of choosing a group of stocks and investing in them optimally to maximize the return while…
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…
This paper investigates a continuous-time portfolio optimization problem with the following features: (i) a no-short selling constraint; (ii) a leverage constraint, that is, an upper limit for the sum of portfolio weights; and (iii) a…
We study a continuous-time Markowitz mean-variance portfolio selection model in which a naive agent, unaware of the underlying time-inconsistency, continuously reoptimizes over time. We define the resulting naive policies through the limit…
In portfolio analysis, the traditional approach of replacing population moments with sample counterparts may lead to suboptimal portfolio choices. I show that optimal portfolio weights can be estimated using a machine learning (ML)…
A cryptocurrency is a digital asset maintained by a decentralised system using cryptography. Investors in this emerging digital market are exploring the profitability potential of portfolios in place of single coins. Portfolios are…
This paper studies a robust portfolio optimization problem under the multi-factor volatility model introduced by Christoffersen et al. (2009). The optimal strategy is derived analytically under the worst-case scenario with or without…
We propose and study a simple model of dynamical redistribution of capital in a diversified portfolio. We consider a hypothetical situation of a portfolio composed of N uncorrelated stocks. Each stock price follows a multiplicative random…
Financial portfolio optimization is a widely studied problem in mathematics, statistics, financial and computational literature. It adheres to determining an optimal combination of weights associated with financial assets held in a…
This paper investigates optimal portfolio strategies in a financial market where the drift of the stock returns is driven by an unobserved Gaussian mean reverting process. Information on this process is obtained from observing stock returns…
Recent advances in quantum hardware offer new approaches to solve various optimization problems that can be computationally expensive when classical algorithms are employed. We propose a hybrid quantum-classical algorithm to solve a dynamic…
We consider the problem of selecting a portfolio of assets that provides the investor a suitable balance of expected return and risk. With respect to the seminal mean-variance model of Markowitz, we consider additional constraints on the…
The Black-Scholes-Merton model is a mathematical model for the dynamics of a financial market that includes derivative investment instruments, and its formula provides a theoretical price estimate of European-style options. The model's…
This paper introduces a unified framework for adaptive portfolio management, integrating dynamic Black-Litterman (BL) optimization with the general factor model, Elastic Net regression, and mean-variance portfolio optimization, which allows…