Related papers: Global risk minimization in financial markets
We educe a perspective on how best to regulate the bank of tomorrow in frames of debate launched by the International Centre for Financial Regulation and Financial Times. Our goal is to create a conceptual framework for policymakers and…
The field of portfolio selection is an active research topic, which combines elements and methodologies from various fields, such as optimization, decision analysis, risk management, data science, forecasting, etc. The modeling and…
We study the emergence of instabilities in a stylized model of a financial market, when different market actors calculate prices according to different (local) market measures. We derive typical properties for ensembles of large random…
The purpose of this research article is to discover how the econophysics analysis can complement the econometrics models in application to the risk management in the central banks and financial institutions, operating within the nonlinear…
We consider an investor facing a classical portfolio problem of optimal investment in a log-Brownian stock and a fixed-interest bond, but constrained to choose portfolio and consumption strategies that reduce a dynamic shortfall risk…
We discuss the portfolio optimization problem with the obligatory deposits constraint. Recently it has been shown that as a consequence of this nonlinear constraint, the solution consists of an exponentially large number of optimal…
Financial market resilience reflects the ability of a financial market to withstand external shocks and to recover from them, while its measurement has yet to be standardized. Accordingly, this paper quantifies the adaptability and…
We consider the problem of rational decision making in the presence of nonlinear constraints. By using tools borrowed from spin glass and random matrix theory, we focus on the portfolio optimisation problem. We show that the number of…
Previous studies into the budget constraint of portfolio optimization problems based on statistical mechanical informatics have not considered that the purchase cost per unit of each asset is distinct. Moreover, the fact that the optimal…
We study the feasibility and noise sensitivity of portfolio optimization under some downside risk measures (Value-at-Risk, Expected Shortfall, and semivariance) when they are estimated by fitting a parametric distribution on a finite sample…
We consider a general class of diffusion-based models and show that, even in the absence of an Equivalent Local Martingale Measure, the financial market may still be viable, in the sense that strong forms of arbitrage are excluded and…
Over the last two decades, financial systems have been studied and analysed from the perspective of complex networks, where the nodes and edges in the network represent the various financial components and the strengths of correlations…
We analyze the stability of financial investment networks, where financial institutions hold overlapping portfolios of assets. We consider the effect of portfolio diversification and heterogeneous investments using a random matrix dynamical…
As demonstrated during the recent financial crisis, regulators require additional analytical tools to assess systemic risk in the financial sector. This paper describes one such tool; namely a novel market modeling and analysis capability.…
All the financial practitioners are working in incomplete markets full of unhedgeable risk-factors. Making the situation worse, they are only equipped with the imperfect information on the relevant processes. In addition to the market risk,…
In this study, we propose a new multi-objective portfolio optimization with idiosyncratic and systemic risks for financial networks. The two risks are measured by the idiosyncratic variance and the network clustering coefficient derived…
Systemic liquidity risk, defined by the IMF as "the risk of simultaneous liquidity difficulties at multiple financial institutions", is a key topic in macroprudential policy and financial stress analysis. Specialized models to simulate…
The aims of this study are twofold. First, we consider an optimal risk allocation problem with non-convex preferences. By establishing an infimal representation for distortion risk measures, we give some necessary and sufficient conditions…
Individual investors are now massively using online brokers to trade stocks with convenient interfaces and low fees, albeit losing the advice and personalization traditionally provided by full-service brokers. We frame the problem faced by…
In this paper, we search for optimal portfolio strategies in the presence of various risk measure that are common in financial applications. Particularly, we deal with the static optimization problem with respect to Value at Risk, Expected…