Related papers: Global risk minimization in financial markets
Any optimization algorithm based on the risk parity approach requires the formulation of portfolio total risk in terms of marginal contributions. In this paper we use the independence of the underlying factors in the market to derive the…
In this work, we consider the optimal portfolio selection problem under hard constraints on trading volume amounts when the dynamics of the risky asset returns are governed by a discrete-time approximation of the Markov-modulated geometric…
This paper focuses on a dynamic multi-asset mean-variance portfolio selection problem under model uncertainty. We develop a continuous time framework for taking into account ambiguity aversion about both expected return rates and…
The question of how to stabilize financial systems has attracted considerable attention since the global financial crisis of 2007-2009. Recently, Beale et al. ("Individual versus systemic risk and the regulator's dilemma", Proc Natl Acad…
Investors who optimize their portfolios under any of the coherent risk measures are naturally led to regularized portfolio optimization when they take into account the impact their trades make on the market. We show here that the impact…
This study emphasizes how crucial it is to visualize machine learning models, especially for the banking industry, in order to improve interpretability and support predictions in high stakes financial settings. Visual tools enable…
This paper studies the robust optimal gain selection problem for financial trading systems, formulated within a \emph{double linear policy} framework, which allocates capital across long and short positions. The key objective is to…
In this paper we develop a concrete and fully implementable approach to the optimization of functionally generated portfolios in stochastic portfolio theory. The main idea is to optimize over a family of rank-based portfolios parameterized…
Market makers provide liquidity to other market participants: they propose prices at which they stand ready to buy and sell a wide variety of assets. They face a complex optimization problem with both static and dynamic components. They…
In portfolio compression, market participants (banks, organizations, companies, financial agents) sign contracts, creating liabilities between each other, which increases the systemic risk. Large, dense markets commonly can be compressed by…
Risk control and optimal diversification constitute a major focus in the finance and insurance industries as well as, more or less consciously, in our everyday life. We present a discussion of the characterization of risks and of the…
Financial undertakings often have to deal with liabilities of the form 'non-hedgeable claim size times value of a tradeable asset', e.g. foreign property insurance claims times fx rates. Which strategy to invest in the tradeable asset is…
Optimization under uncertainty and risk is indispensable in many practical situations. Our paper addresses stability of optimization problems using composite risk functionals which are subjected to measure perturbations. Our main focus is…
Previous literature shows that prevalent risk measures such as Value at Risk or Expected Shortfall are ineffective to curb excessive risk-taking by a tail-risk-seeking trader with S-shaped utility function in the context of portfolio…
The failure of key financial institutions may accelerate risk contagion due to their interconnections within the system. In this paper, we propose a robust portfolio strategy to mitigate systemic risks during extreme events. We use the…
We study a utility maximization problem in a financial market with a stochastic drift process, combining a worst-case approach with filtering techniques. Drift processes are difficult to estimate from asset prices, and at the same time…
Predicting volatility in financial markets, including stocks, index ETFs, foreign exchange, and cryptocurrencies, remains a challenging task due to the inherent complexity and non-linear dynamics of these time series. In this study, I apply…
Network theory proved recently to be useful in the quantification of many properties of financial systems. The analysis of the structure of investment portfolios is a major application since their eventual correlation and overlap impact the…
Stock markets are complex systems exhibiting collective phenomena and particular features such as synchronization, fluctuations distributed as power-laws, non-random structures and similarity to neural networks. Such specific properties…
We investigate the stability of the Epstein-Zin problem with respect to small distortions in the dynamics of the traded securities. We work in incomplete market model settings, where our parametrization of perturbations allows for joint…