Related papers: Optimization of relative arbitrage
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,…
This paper investigates a continuous-time portfolio optimization problem with the following features: (i) a no-short selling constraint; (ii) a leverage constraint, that is, an upper limit for the sum of portfolio weights; and (iii) a…
We unify and establish equivalence between the pathwise and the quasi-sure approaches to robust modelling of financial markets in discrete time. In particular, we prove a Fundamental Theorem of Asset Pricing and a Superhedging Theorem,…
A market model with $d$ assets in discrete time is considered where trades are subject to proportional transaction costs given via bid-ask spreads, while the existence of a num\`eraire is not assumed. It is shown that robust no arbitrage…
Equity market dynamics are conventionally investigated in name space where stocks are indexed by company names. In contrast, by indexing stocks based on their ranks in capitalization, we gain a different perspective of market dynamics in…
This paper discusses the sensitivity of the long-term expected utility of optimal portfolios for an investor with constant relative risk aversion. Under an incomplete market given by a factor model, we consider the utility maximization…
In this paper we provide a quantitative analysis to the concept of arbitrage, that allows to deal with model uncertainty without imposing the no-arbitrage condition. In markets that admit ``small arbitrage", we can still make sense of the…
In this paper, we search for optimal portfolio strategies in the presence of various risk measure that are common in financial applications. Particularly, we deal with the static optimization problem with respect to Value at Risk, Expected…
We consider the problem of portfolio optimization in a simple incomplete market and under a general utility function. By working with the associated Hamilton-Jacobi-Bellman partial differential equation (HJB PDE), we obtain a closed-form…
Within a common arbitrage-free semimartingale financial market we consider the problem of determining all Nash equilibrium investment strategies for $n$ agents who try to maximize the expected utility of their relative wealth. The utility…
Motivated by the asset-liability management of a nuclear power plant operator, we consider the problem of finding the least expensive portfolio, which outperforms a given set of stochastic benchmarks. For a specified loss function, the…
This paper considers the constrained portfolio optimization in a generalized life-cycle model. The individual with a stochastic income manages a portfolio consisting of stocks, a bond, and life insurance to maximize his or her consumption…
We consider the classical problem of building an arbitrage-free implied volatility surface from bid-ask quotes. We design a fast numerical procedure, for which we prove the convergence, based on the Sinkhorn algorithm that has been recently…
In the world of modern financial theory, portfolio construction has traditionally operated under at least one of two central assumptions: the constraints are derived from a utility function and/or the multivariate probability distribution…
We consider a utility-maximization problem in a general semimartingale financial model, subject to constraints on the number of shares held in each risky asset. These constraints are modeled by predictable convex-set-valued processes whose…
The existing approaches to sparse wealth allocations (1) are limited to low-dimensional setup when the number of assets is less than the sample size; (2) lack theoretical analysis of sparse wealth allocations and their impact on portfolio…
A classical portfolio theory deals with finding the optimal proportion in which an agent invests a wealth in a risk-free asset and a probabilistic risky asset. Formulating and solving the problem depend on how the risk is represented and…
This paper considers the finite horizon portfolio rebalancing problem in terms of mean-variance optimization, where decisions are made based on current information on asset returns and transaction costs. The study's novelty is that the…
We show that in an equity market model with Knightian uncertainty regarding the relative risk and covariance structure of its assets, the arbitrage function -- defined as the reciprocal of the highest return on investment that can be…
Multi-objective portfolio optimisation is a critical problem researched across various fields of study as it achieves the objective of maximising the expected return while minimising the risk of a given portfolio at the same time. However,…