Related papers: Risk Without Return
We consider an investment problem in which an investor performs capital injections to increase the liquidity of a firm for it to maximise profit from market operations. Each time the investor performs an injection, the investor incurs a…
We solve an expected utility-maximization problem with a Value-at-risk constraint on the terminal portfolio value in an incomplete financial market due to stochastic volatility. To derive the optimal investment strategy, we use the dynamic…
Stock return predictability is an important research theme as it reflects our economic and social organization, and significant efforts are made to explain the dynamism therein. Statistics of strong explanative power, called "factor" have…
We establish sharp upper and lower bounds for distortion risk metrics under distributional uncertainty. The uncertainty sets are characterized by four key features of the underlying distribution: mean, variance, unimodality, and Wasserstein…
A method for calculating multi-portfolio time consistent multivariate risk measures in discrete time is presented. Market models for $d$ assets with transaction costs or illiquidity and possible trading constraints are considered on a…
Income and risk coexist, yet investors are often so focused on chasing high returns that they overlook the potential risks that can lead to high losses. Therefore, risk forecasting and risk control is the cornerstone of investment. To…
We reveal a geometric structure underlying both hedging and investment products. The structure follows from a simple formula expressing investment risks in terms of returns. This informs optimal product designs. Optimal pure hedging…
Against the widely held belief that diversification at banking institutions contributes to the stability of the financial system, Wagner (2010) found that diversification actually makes systemic crisis more likely. While it is true, as…
This study introduces a dynamic investment framework to enhance portfolio management in volatile markets, offering clear advantages over traditional static strategies. Evaluates four conventional approaches : equal weighted, minimum…
The quest for diversification has led to an increasing number of complex funds with a high number of strategies and non-linear payoffs. The new generation of Alternative Risk Premia (ARP) funds are an example that has been very popular in…
This study develops a multi-factor framework where not only market risk is considered but also potential changes in the investment opportunity set. Although previous studies find no clear evidence about a positive and significant relation…
Acquisition of data is a difficult task in many applications of machine learning, and it is only natural that one hopes and expects the population risk to decrease (better performance) monotonically with increasing data points. It turns…
Measures of risk concentration and their asymptotic behavior for portfolios with heavy-tailed risk factors is of interest in risk management. Second order regular variation is a structural assumption often imposed on such risk factors to…
In normal times, it is assumed that financial institutions operating in non-overlapping sectors have complementary and distinct outcomes, typically reflected in mostly uncorrelated outcomes and asset returns. Such is the reasoning behind…
Previous literature shows that prevalent risk measures such as Value at Risk or Expected Shortfall are ineffective to curb excessive risk-taking by a tail-risk-seeking trader with S-shaped utility function in the context of portfolio…
We investigate the impact of big winner stocks on the performance of active and passive investment strategies using a combination of numerical and analytical techniques. Our analysis is based on historical stock price data from 2006 to 2021…
We present a reinforcement learning (RL) approach for robust optimisation of risk-aware performance criteria. To allow agents to express a wide variety of risk-reward profiles, we assess the value of a policy using rank dependent expected…
We investigate the performance of dynamic portfolios constructed using more than 21,000 technical trading rules on 12 categorical and country-specific markets over the 2004-2015 study period, on rolling forward structures of different…
We revisit the recently introduced concept of return risk measures (RRMs) and extend it by incorporating risk management via multiple so-called eligible assets. The resulting new class of risk measures, termed multi-asset return risk…
This paper studies an optimal investment and risk control problem for an insurer with default contagion and regime-switching. The insurer in our model allocates his/her wealth across multi-name defaultable stocks and a riskless bond under…