Related papers: Energy, entropy, and arbitrage
We investigate the thermodynamics as well as the population dynamics of ecosystems based on a stochastic approach in which the number of individuals of the several species of the ecosystem are treated as stochastic variables. The several…
In this paper we investigate the use of path-integral formalism and the concepts of entropy and traffic in the context of molecular motors. We show that together with time-reversal symmetry breaking arguments one can find bounds on…
We address the problem of portfolio optimization under the simplest coherent risk measure, i.e. the expected shortfall. As it is well known, one can map this problem into a linear programming setting. For some values of the external…
Robust optimization provides a principled framework for decision-making under uncertainty, with broad applications in finance, engineering, and operations research. In portfolio optimization, uncertainty in expected returns and covariances…
We give a new formulation of the relative arbitrage problem from stochastic portfolio theory that asks for a time horizon beyond which arbitrage relative to the market exists in all ``sufficiently volatile'' markets. In our formulation,…
Electric utilities must make massive capital investments in the coming years to respond to explosive growth in demand, aging assets and rising threats from extreme weather. Utilities today already have rigorous frameworks for capital…
This paper introduces a novel methodology for index return forecasting, blending highly correlated stock prices, advanced deep learning techniques, and intricate factor integration. Departing from conventional cap-weighted approaches, our…
This paper investigates performance attribution measures as a basis for constraining portfolio optimization. We employ optimizations that minimize expected tail loss and investigate both asset allocation (AA) and the selection effect (SE)…
We study the feasibility and noise sensitivity of portfolio optimization under some downside risk measures (Value-at-Risk, Expected Shortfall, and semivariance) when they are estimated by fitting a parametric distribution on a finite sample…
We study a robust portfolio optimization problem under model uncertainty for an investor with logarithmic or power utility. The uncertainty is specified by a set of possible L\'evy triplets; that is, possible instantaneous drift, volatility…
In this article, we present a novel approach for the construction of an environment-friendly green portfolio using the ESG ratings, and application of the modern portfolio theory to present what we call as the ``green efficient frontier''…
The physical foundations of a variety of emerging technologies --- ranging from the applications of quantum entanglement in quantum information to the applications of nonequilibrium bulk and interface phenomena in microfluidics, biology,…
Financial markets typically exhibit dynamically complex properties as they undergo continuous interactions with economic and environmental factors. The Efficient Market Hypothesis indicates a rich difference in the structural complexity of…
One of the major issues studied in finance that has always intrigued, both scholars and practitioners, and to which no unified theory has yet been discovered, is the reason why prices move over time. Since there are several well-known…
In this work a relation between a measure of short-term arbitrage in the market and the excess growth of portfolios as a notion of long-term arbitrage is established. The former originates from "Geometric Arbitrage Theory" and the latter…
This paper presents a comparative analysis of the performances of three portfolio optimization approaches. Three approaches of portfolio optimization that are considered in this work are the mean-variance portfolio (MVP), hierarchical risk…
An efficient approach to the calculation of the $\epsilon$-entropy is proposed. The method is based on the idea of looking at the information content of a string of data, by analyzing the signal only at the instants when the fluctuations…
Macroscopic properties of equity markets affect the performance of active equity strategies but many are not adequately captured by conventional models of financial mathematics and econometrics. Using the CRSP Database of the US equity…
We study market-to-book ratios of stocks in the context of Stochastic Portfolio Theory. Functionally generated portfolios that depend on auxiliary economic variables other than relative capitalizations ("sizes") are developed in two ways,…
The effect of proportional transaction costs on systematically generated portfolios is studied empirically. The performance of several portfolios (the index tracking portfolio, the equally-weighted portfolio, the entropy-weighted portfolio,…