Related papers: Saddlepoint methods in portfolio theory
Managing a portfolio to a risk model can tilt the portfolio toward weaknesses of the model. As a result, the optimized portfolio acquires downside exposure to uncertainty in the model itself, what we call "second order risk." We propose a…
Portfolio optimization is a critical task in investment. Most existing portfolio optimization methods require information on the distribution of returns of the assets that make up the portfolio. However, such distribution information is…
In this paper, we investigate the features and the performance of the Risk Parity (RP) portfolios using the Mean Absolute Deviation (MAD) as a risk measure. The RP model is a recent strategy for asset allocation that aims at equally sharing…
We derive valuations of a portfolio of financial instruments from a securities lending perspective, under different assumptions, and show a weighting scheme that converges to the true valuation. We illustrate conditions under which our…
We consider calculation of capital requirements when the underlying economic scenarios are determined by simulatable risk factors. In the respective nested simulation framework, the goal is to estimate portfolio tail risk, quantified via…
A so called Zipf analysis portofolio management technique is introduced in order to comprehend the risk and returns. Two portofoios are built each from a well known financial index. The portofolio management is based on two approaches: one…
Risk management is very important for individual investors or companies. There are many ways to measure the risk of investment. Prices of risky assets vary rapidly and randomly due to the complexity of finance market. Random interval is a…
Robust estimation for modern portfolio selection on a large set of assets becomes more important due to large deviation of empirical inference on big data. We propose a distributionally robust methodology for high-dimensional mean-variance…
This paper develops a method to derive optimal portfolios and risk premia explicitly in a general diffusion model for an investor with power utility and a long horizon. The market has several risky assets and is potentially incomplete.…
Classical mean-variance portfolio theory tells us how to construct a portfolio of assets which has the greatest expected return for a given level of return volatility. Utility theory then allows an investor to choose the point along this…
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…
In this work, we explore the possibility of utilizing transfer learning techniques to address the financial portfolio optimization problem. We introduce a novel concept called "transfer risk", within the optimization framework of transfer…
In this paper we propose a problem-driven scenario generation approach to the single-period portfolio selection problem which use tail risk measures such as conditional value-at-risk. Tail risk measures are useful for quantifying potential…
In risk management it is desirable to grasp the essential statistical features of a time series representing a risk factor. This tutorial aims to introduce a number of different stochastic processes that can help in grasping the essential…
This article is focused on using a new measurement of risk-- Weighted Value at Risk to develop a new method of constructing initiate from the TVAR solving problem, based on MATLAB software, using the historical simulation method (avoiding…
We study the consistency of sample mean-variance portfolios of arbitrarily high dimension that are based on Bayesian or shrinkage estimation of the input parameters as well as weighted sampling. In an asymptotic setting where the number of…
In this paper, we document a novel machine learning based bottom-up approach for static and dynamic portfolio optimization on, potentially, a large number of assets. The methodology applies to general constrained optimization problems and…
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…
The aim of this paper is to describe a new an integrated methodology for project control under uncertainty. This proposal is based on Earned Value Methodology and risk analysis and presents several refinements to previous methodologies.…
We introduce a new numerical approximation method for functionals of factor credit portfolio models based on the theory of mod-$\phi$ convergence and mod-$\phi$ approximation schemes. The method can be understood as providing correction…