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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…
Pumped storage hydro units (PSHU) are great sources of flexibility in power systems. This is especially valuable in modern systems with increasing shares of intermittent renewable resources. However, the flexibility from PSHUs, particularly…
Time-varying mixture densities occur in many scenarios, for example, the distributions of keywords that appear in publications may evolve from year to year, video frame features associated with multiple targets may evolve in a sequence. Any…
In the first part of the paper, we consider a discrete-time stochastic control system. We show that, under certain conditions, the set of random occupational measures generated by the state-control trajectories of the system as well as the…
We present a framework to interpret signal temporal logic (STL) formulas over discrete-time stochastic processes in terms of the induced risk. Each realization of a stochastic process either satisfies or violates an STL formula. In fact, we…
We present a general framework for measuring the liquidity risk. The theoretical framework defines a class of risk measures that incorporate the liquidity risk into the standard risk measures. We consider a one-period risk measurement…
This paper introduces a methodology for constructing a market index composed of a liquid risky asset and a liquid risk-free asset that achieves a fixed target volatility. Existing volatility-targeting strategies typically scale portfolio…
In this paper, we seek to understand the behavior of dynamical systems that are perturbed by a parameter that changes discretely in time. If we impose certain conditions, we can study certain embedded systems within a hybrid system as…
We consider a financial intermediary managing assets and liabilities exposed to several risk sources and seeking an optimal portfolio strategy to minimise the initial capital invested and the total risk associated with investment losses and…
Driven by ambitious renewable portfolio standards, large-scale inclusion of variable energy resources (such as wind and solar) are expected to introduce unprecedented levels of uncertainty into power system operations. The current practice…
We implement a systematic asset allocation model using the Historical Simulation with Flexible Probabilities (HS-FP) framework developed by Meucci. The HS-FP framework is a flexible non-parametric estimation approach that considers future…
In academic literature portfolio risk management and hedging are often versed in the language of stochastic control and Hamilton--Jacobi--Bellman~(HJB) equations in continuous time. In practice the continuous-time framework of stochastic…
In this paper we perform robustness and sensitivity analysis of several continuous-time stochastic volatility (SV) models with respect to the process of market calibration. The analyses should validate the hypothesis on importance of the…
Assuming frictionless trading, classical stochastic portfolio theory (SPT) provides relative arbitrage strategies. However, the costs associated with real-world execution are state-dependent, volatile, and under increasing stress during…
We address the problem of strategic asset allocation (SAA) with portfolios that include illiquid alternative asset classes. The main challenge in portfolio construction with illiquid asset classes is that we do not have direct control over…
This paper addresses the importance of incorporating various risk measures in portfolio management and proposes a dynamic hybrid portfolio optimization model that combines the spectral risk measure and the Value-at-Risk in the mean-variance…
We consider portfolio selection when decisions based on a dynamic risk measure are affected by the use of a moving horizon, and the possible inconsistencies that this creates. By giving a formal treatment of time consistency which is…
Stochastic Spatio-Temporal processes are prevalent across domains ranging from modeling of plasma to the turbulence in fluids to the wave function of quantum systems. This letter studies a measure-theoretic description of such systems by…
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…
This paper develops and empirically evaluates a Sharpe-driven stock selection and liquidity-constrained portfolio optimization framework designed for the Chinese equity market. The proposed methodology integrates three sequential stages:…