Related papers: Model-free CPPI
Classical portfolio models degrade under structural breaks, whereas flexible machine-learning allocation methods often lack arbitrage consistency and interpretability. We propose Causal PDE-Control Models (CPCMs), a framework that…
We present a class of flexible and tractable static factor models for the term structure of joint default probabilities, the factor copula models. These high-dimensional models remain parsimonious with pair-copula constructions, and nest…
In this paper, we investigate an optimal investment problem associated with proportional portfolio insurance (PPI) strategies in the presence of jumps in the underlying dynamics. PPI strategies enable investors to mitigate downside risk…
We consider the problem of accurately measuring the credit risk of a portfolio consisting of loss exposures such as loans, bonds and other financial assets. We are particularly interested in the probability of large portfolio losses. We…
The mean-variance portfolio model, based on the risk-return trade-off for optimal asset allocation, remains foundational in portfolio optimization. However, its reliance on restrictive assumptions about asset return distributions limits its…
Without probability theory, we define classes of supermartingales, martingales, and semimartingales in idealized financial markets with continuous price paths. This allows us to establish probability-free versions of a number of standard…
We propose and study a simple model of dynamical redistribution of capital in a diversified portfolio. We consider a hypothetical situation of a portfolio composed of N uncorrelated stocks. Each stock price follows a multiplicative random…
Sampling-based model predictive control (MPC) is effective for nonlinear systems but often produces non-smooth control inputs due to random sampling. To address this issue, we extend the model predictive path integral (MPPI) framework with…
Motivated by practical applications, we explore the constrained multi-period mean-variance portfolio selection problem within a market characterized by a dynamic factor model. This model captures predictability in asset returns driven by…
In a discrete-time market, we study model-independent superhedging, while the semi-static superhedging portfolio consists of {\it three} parts: static positions in liquidly traded vanilla calls, static positions in other tradable, yet…
The paper develops no arbitrage results for trajectory based models by imposing general constraints on the trading portfolios. The main condition imposed, in order to avoid arbitrage opportunities, is a local continuity requirement on the…
We demonstrate the application of an algorithmic trading strategy based upon the recently developed dynamic mode decomposition (DMD) on portfolios of financial data. The method is capable of characterizing complex dynamical systems, in this…
This paper presents comparison results and establishes risk bounds for credit portfolios within classes of Bernoulli mixture models, assuming conditionally independent defaults that are stochastically increasing with a common risk factor.…
We introduce a model for the dynamics of stock prices based on a non quadratic path integral. The model is a generalization of Ilinski's path integral model, more precisely we choose a different action, which can be tuned to different time…
Given the increasing importance of environmental, social and governance (ESG) factors, particularly carbon emissions, we investigate optimal proportional portfolio insurance (PPI) strategies accounting for carbon footprint reduction. PPI…
It is well established that in a market with inclusion of a risk-free asset the single-period mean-variance efficient frontier is a straight line tangent to the risky region, a fact that is the very foundation of the classical CAPM. In this…
We present a sampling-based control approach that can generate smooth actions for general nonlinear systems without external smoothing algorithms. Model Predictive Path Integral (MPPI) control has been utilized in numerous robotic…
We generalize the derivation of model predictive path integral control (MPPI) to allow for a single joint distribution across controls in the control sequence. This reformation allows for the implementation of adaptive importance sampling…
We consider a general class of diffusion-based models and show that, even in the absence of an Equivalent Local Martingale Measure, the financial market may still be viable, in the sense that strong forms of arbitrage are excluded and…
We develop a methodology for index tracking and risk exposure control using financial derivatives. Under a continuous-time diffusion framework for price evolution, we present a pathwise approach to construct dynamic portfolios of…