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In this paper we consider the strategic asset allocation of an insurance company. This task can be seen as a special case of portfolio optimization. In the 1950s, Markowitz proposed to formulate portfolio optimization as a bicriteria…
Since Markowitz's mean-variance framework, optimizing a portfolio that maximizes the profit and minimizes the risk has been ubiquitous in the financial industry. Initially, profit and risk were measured by the first two moments of the…
Modeling and managing portfolio risk is perhaps the most important step to achieve growing and preserving investment performance. Within the modern portfolio construction framework that built on Markowitz's theory, the covariance matrix of…
The vector of periodic, compound returns of a typical investment portfolio is almost never a convex combination of the return vectors of the securities in the portfolio. As a result the ex post version of Harry Markowitz's "standard…
Recent developments in deep learning techniques have motivated intensive research in machine learning-aided stock trading strategies. However, since the financial market has a highly non-stationary nature hindering the application of…
We relook at the classic equity fund selection and portfolio construction problems from a new perspective and propose an easy-to-implement framework to tackle the problem in practical investment. Rather than the conventional way by…
This paper proposes a novel trading system which plays the role of an artificial counselor for stock investment. In this paper, the stock future prices (technical features) are predicted using Support Vector Regression. Thereafter, the…
Optimal capital allocation between different assets is an important financial problem, which is generally framed as the portfolio optimization problem. General models include the single-period and multi-period cases. The traditional…
The paper studies problem of continuous time optimal portfolio selection for a incom- plete market diffusion model. It is shown that, under some mild conditions, near optimal strategies for investors with different performance criteria can…
Cover's celebrated theorem states that the long run yield of a properly chosen "universal" portfolio is as good as the long run yield of the best retrospectively chosen constant rebalanced portfolio. The "universality" pertains to the fact…
We consider the investor who doesn't trade shares of his portfolio. The investor only observes the current trades made in the market with his securities to estimate the current return, variance, and risks of his unchanged portfolio. We show…
Recent studies stressed the fact that covariance matrices computed from empirical financial time series appear to contain a high amount of noise. This makes the classical Markowitz Mean-Variance Optimization model unable to correctly…
We give an algebraic definition of a Markowitz market and classify markets up to isomorphism. Given this classification, the theory of portfolio optimization in Markowitz markets without short selling constraints becomes trivial.…
We propose a novel portfolio selection approach that manages to ease some of the problems that characterise standard expected utility maximisation. The optimal portfolio is no longer defined as the extremum of a suitably chosen utility…
We present a method for constructing the log-optimal portfolio using the well-calibrated forecasts of market values. Dawid's notion of calibration and the Blackwell approachability theorem are used for computing well-calibrated forecasts.…
Stochastic portfolio theory aims at finding relative arbitrages, i.e. trading strategies which outperform the market with probability one. Functionally generated portfolios, which are deterministic functions of the market weights, are an…
This is an overview of the area of Stochastic Portfolio Theory, and can be seen as an updated and extended version of the survey paper by Fernholz and Karatzas (Handbook of Numerical Analysis Vol.15:89-167, 2009).
This work initiates research into the problem of determining an optimal investment strategy for investors with different attitudes towards the trade-offs of risk and profit. The probability distribution of the return values of the stocks…
We analyze the theory of optimal investment in risky assets, developed recently by Marsili, Maslov and Zhang [Physica A 253 (1998) 403]. When the real data are used instead of abstract stochastic process, it appears that a non-trivial…
The variance measures the portfolio risks the investors are taking. The investor, who holds his portfolio and doesn't trade his shares, at the current time can use the time series of the market trades that were made during the averaging…