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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…
We present and discuss a stochastic model of financial assets dynamics based on the idea of an inverse renormalization group strategy. With this strategy we construct the multivariate distributions of elementary returns based on the scaling…
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…
A theoretical method is empirically illustrated in finding the best time to forsake a loan such that the overall credit loss is minimised. This is predicated by forecasting the future cash flows of a loan portfolio up to the contractual…
Managing investment portfolios is an old and well know problem in multiple fields including financial mathematics and financial engineering as well as econometrics and econophysics. Multiple different concepts and theories were used so far…
Motivated by the current fears of a potentially stagflationary global economic environment, this paper uses new and recently introduced mathematical techniques to study multivariate time series pertaining to country inflation (CPI),…
We propose a new set of stylized facts quantifying the structure of financial markets. The key idea is to study the combined structure of both investment strategies and prices in order to open a qualitatively new level of understanding of…
International trade fluxes evolve as countries revise their portfolios of trade products towards economic development. Accordingly products' shares in international trade vary with time, reflecting the transfer of capital between distinct…
The financial markets are understood as complex dynamical systems whose dynamics is analysed mostly using nonstationary and brief data sets that usually come from stock markets. For such data sets, a reliable method of analysis is based on…
This article develops a model that takes into account skewness risk in risk parity portfolios. In this framework, asset returns are viewed as stochastic processes with jumps or random variables generated by a Gaussian mixture distribution.…
In this paper, we consider the portfolio optimization problem in a financial market under a general utility function. Empirical results suggest that if a significant market fluctuation occurs, invested wealth tends to have a notable change…
In stochastic finance, one traditionally considers the return as a competitive measure of an asset, {\it i.e.}, the profit generated by that asset after some fixed time span $\Delta t$, say one week or one year. This measures how well (or…
We hypothesize that portfolio sorts based on the V/P ratio generate excess returns and consist of companies that are undervalued for prolonged periods. Results, for the US market show that high V/P portfolios outperform low V/P portfolios…
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…
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…
In this paper, we investigate a portfolio selection problem with transaction costs under a two-factor stochastic volatility structure, where volatility follows a mean-reverting process with a stochastic mean-reversion level. The model…
We consider the following problem in stochastic portfolio theory. Are there portfolios that are relative arbitrages with respect to the market portfolio over very short periods of time under realistic assumptions? We answer a slightly…
A phenomenological investigation of the endogenous and exogenous dynamics in the fluctuations of capital fluxes is investigated on the Chinese stock market using mean-variance analysis, fluctuation analysis and their generalizations to…
This paper studies a type of periodic utility maximization for portfolio management in an incomplete market model, where the underlying price diffusion process depends on some external stochastic factors. The portfolio performance is…
This paper studies a non-stochastic version of Fernholz's stochastic portfolio theory for a simple model of stock markets with continuous price paths. It establishes non-stochastic versions of the most basic results of stochastic portfolio…