Related papers: Minimizing Shortfall
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 study the properties of Expected Shortfall from the point of view of financial risk management. This measure --- which emerges as a natural remedy in some cases where Value at Risk (VaR) is not able to distinguish portfolios which bear…
We address the problem of portfolio optimization under the simplest coherent risk measure, i.e. the expected shortfall. As it is well known, one can map this problem into a linear programming setting. For some values of the external…
Risk measures for multivariate financial positions are studied in a utility-based framework. Under a certain incomplete preference relation, shortfall and divergence risk measures are defined as the optimal values of specific set…
We obtain a lower asymptotic bound on the decay rate of the probability of a portfolio's underperformance against a benchmark over a large time horizon. It is assumed that the prices of the securities are governed by geometric Brownian…
We study the ex-ante minimization of market inefficiency, defined in terms of minimum deviation of market prices from fundamental values, from a centralized planner's perspective. Prices are pressured from exogenous trading actions of…
We study issues of robustness in the context of Quantitative Risk Management and Optimization. We develop a general methodology for determining whether a given risk measurement related optimization problem is robust, which we call…
Estimating the covariance of asset returns, i.e., the risk model, is a key component of financial portfolio construction and evaluation. Most risk modeling approaches produce a factor model that decomposes the asset variability into two…
We study a non-concave optimization problem in which a financial company maximizes the expected utility of the surplus under a risk-based regulatory constraint. For this problem, we consider four different prevalent risk constraints…
We analyze characteristics' joint predictive information through the lens of out-of-sample power utility functions. Linking weights to characteristics to form optimal portfolios suffers from estimation error which we mitigate by maximizing…
In this paper we propose a multivariate quantile regression framework to forecast Value at Risk (VaR) and Expected Shortfall (ES) of multiple financial assets simultaneously, extending Taylor (2019). We generalize the Multivariate…
We introduce novel variants of momentum by incorporating the variance of the stochastic loss function. The variance characterizes the confidence or uncertainty of the local features of the averaged loss surface across the i.i.d. subsets of…
We use a replica approach to deal with portfolio optimization problems. A given risk measure is minimized using empirical estimates of asset values correlations. We study the phase transition which happens when the time series is too short…
Marginal expected shortfall is unquestionably one of the most popular systemic risk measures. Studying its extreme behaviour is particularly relevant for risk protection against severe global financial market downturns. In this context,…
We empirically test predictability on asset price by using stock selection rules based on maximum drawdown and its consecutive recovery. In various equity markets, monthly momentum- and weekly contrarian-style portfolios constructed from…
It is shown that the axioms for coherent risk measures imply that whenever there is an asset in a portfolio that dominates the others in a given sample (which happens with finite probability even for large samples), then this portfolio…
This paper solves a utility maximization problem under utility-based shortfall risk constraint, by proposing an approach using Lagrange multiplier and convex duality. Under mild conditions on the asymptotic elasticity of the utility…
Financial institutions have to allocate so-called "economic capital" in order to guarantee solvency to their clients and counter parties. Mathematically speaking, any methodology of allocating capital is a "risk measure", i.e. a function…
We study the problem of optimal long term portfolio selection with a view to beat a benchmark. Two kinds of objectives are considered. One concerns the probability of outperforming the benchmark and seeks either to minimise the decay rate…
Overconservatism has long been recognized as a major issue with robust optimization, despite its key advantages of tractability, performance guarantee, and limited information. To address this issue, a new criterion is proposed that can…