Related papers: Hedging under multiple risk constraints
Stochastic portfolio theory aims at finding relative arbitrages, i.e. trading strategies which outperform the market with probability one. Functionally generated portfolios, which are deterministic functions of the market weights, are an…
The main purpose of this paper is to analyze solutions to a fully nonlinear parabolic equation arising from the problem of optimal portfolio construction. We show how the problem of optimal stock to bond proportion in the management of…
Goal-based investing is concerned with reaching a monetary investment goal by a given finite deadline, which differs from mean-variance optimization in modern portfolio theory. In this article, we expand the close connection between…
We consider the pricing and hedging of exotic options in a model-independent set-up using \emph{shortfall risk and quantiles}. We assume that the marginal distributions at certain times are given. This is tantamount to calibrating the model…
We propose a new method for finding statistical arbitrages that can contain more assets than just the traditional pair. We formulate the problem as seeking a portfolio with the highest volatility, subject to its price remaining in a band…
How should financial institutions hedge their balance sheets against interest rate risk when managing long-term assets and liabilities? We address this question by proposing a bond portfolio solution based on ambiguity-averse preferences,…
This paper considers the problem of optimal liquidation of a position in a risky security in a financial market, where price evolution are risky and trades have an impact on price as well as uncertainty in the filling orders. The problem is…
Model-based process simulation can be used to derive designs and operating conditions of chemical processes that optimally balance multiple objectives, such as quality, costs, or environmental impacts. This work focuses on identifying…
Modern portfolio theory(MPT) addresses the problem of determining the optimum allocation of investment resources among a set of candidate assets. In the original mean-variance approach of Markowitz, volatility is taken as a proxy for risk,…
We consider the problem of portfolio selection within the classical Markowitz mean-variance framework, reformulated as a constrained least-squares regression problem. We propose to add to the objective function a penalty proportional to the…
We investigate the well-posedness of a general class of singular stochastic control problems in which controls are processes of finite variation. We develop an abstract framework, which we then apply to storage management and portfolio…
In the frictionless discrete time financial market of Bouchard et al.(2015) we consider a trader who, due to regulatory requirements or internal risk management reasons, is required to hedge a claim $\xi$ in a risk-conservative way relative…
We investigate the optimal strategy over a finite time horizon for a portfolio of stock and bond and a derivative in an multiplicative Markovian market model with transaction costs (friction). The optimization problem is solved by a…
The non-storability of electricity makes it unique among commodity assets, and it is an important driver of its price behaviour in secondary financial markets. The instantaneous and continuous matching of power supply with demand is a key…
In portfolio analysis, the traditional approach of replacing population moments with sample counterparts may lead to suboptimal portfolio choices. I show that optimal portfolio weights can be estimated using a machine learning (ML)…
In this paper we consider the problem of minimising drawdown in a portfolio of financial assets. Here drawdown represents the relative opportunity cost of the single best missed trading opportunity over a specified time period. We formulate…
The multi-energy management framework of industrial parks advocates energy conversion and scheduling, which takes full advantage of the compensation and temporal availability of multiple energy. However, how to exploit elastic loads and…
We consider hedging of a contingent claim by a 'semi-static' strategy composed of a dynamic position in one asset and static (buy-and-hold) positions in other assets. We give general representations of the optimal strategy and the hedging…
The optimization of large portfolios displays an inherent instability to estimation error. This poses a fundamental problem, because solutions that are not stable under sample fluctuations may look optimal for a given sample, but are, in…
This paper studies some unconventional utility maximization problems when the ratio type relative portfolio performance is periodically evaluated over an infinite horizon. Meanwhile, the agent is prohibited from short-selling stocks. Our…