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In this paper we present results on dynamic multivariate scalar risk measures, which arise in markets with transaction costs and systemic risk. Dual representations of such risk measures are presented. These are then used to obtain the main…
In this work, I address the issue of forming riskless hedge in the continuous time option pricing model with stochastic stock volatility. I show that it is essential to verify whether the replicating portfolio is self-financing, in order…
Time series momentum strategies are widely applied in the quantitative financial industry and its academic research has grown rapidly since the work of Moskowitz, Ooi and Pedersen (2012). However, trading signals are usually obtained via…
Designing dynamic portfolio insurance strategies under market conditions switching between two or more regimes is a challenging task in financial economics. Recently, a promising approach employing the value-at-risk (VaR) measure to assign…
Portfolio optimization has long been dominated by covariance-based strategies, such as the Markowitz Mean-Variance framework. However, these approaches often fail to ensure a balanced risk structure across assets, leading to concentration…
Stock market returns are typically analyzed using standard regression, yet they reside on irregular domains which is a natural scenario for graph signal processing. To this end, we consider a market graph as an intuitive way to represent…
In most real scenarios the construction of a risk-neutral portfolio must be performed in discrete time and with transaction costs. Two human imposed constraints are the risk-aversion and the profit maximization, which together define a…
This paper studies the portfolio optimization problem when the investor's utility is general and the return and volatility of the risky asset are fast mean-reverting, which are important to capture the fast-time scale in the modeling of…
Market traders often engage in the frequent transaction of volatile assets to optimize their total return. In this study, we introduce a novel investment strategy model, anchored on the 'lazy factor.' Our approach bifurcates into a Price…
Portfolio diversification is a cornerstone of modern finance, while risk aversion is central to decision theory; both concepts are long-standing and foundational. We investigate their connections by studying how different forms of…
In this paper we present a framework for risk-sensitive model predictive control (MPC) of linear systems affected by stochastic multiplicative uncertainty. Our key innovation is to consider a time-consistent, dynamic risk evaluation of the…
Value-at-risk (VaR) has been playing the role of a standard risk measure since its introduction. In practice, the delta-normal approach is usually adopted to approximate the VaR of portfolios with option positions. Its effectiveness,…
Financial markets tend to switch between various market regimes over time, making stationarity-based models unsustainable. We construct a regime-switching model independent of asset classes for risk-adjusted return predictions based on…
This paper studies a mean-risk portfolio choice problem for log-returns in a continuous-time, complete market. This is a growth-optimal problem with risk control. The risk of log-returns is measured by weighted Value-at-Risk (WVaR), which…
This paper studies the mean-variance optimal portfolio choice of an investor pre-committed to a deterministic investment policy in continuous time in a market with mean-reversion in the risk-free rate and the equity risk-premium. In the…
This paper attempts to find a relationship between agents' risk aversion and inequality of incomes. Specifically, a model is proposed for the evolution in time of surplus/deficit distribution, and the long-time distributions are…
We show that financial correlations exhibit a non-trivial dynamic behavior. We introduce a simple phenomenological model of a multi-asset financial market, which takes into account the impact of portfolio investment on price dynamics. This…
Recent works have increasingly applied Large Language Models (LLMs) as agents in financial stock market simulations to test if micro-level behaviors aggregate into macro-level phenomena. However, a crucial question arises: Do LLM agents'…
We quantify model risk of a financial portfolio whereby a multi-period mean-standard-deviation criterion is used as a selection criterion. In this work, model risk is defined as the loss due to uncertainty of the underlying distribution of…
We present a mean-variance policy iteration (MVPI) framework for risk-averse control in a discounted infinite horizon MDP optimizing the variance of a per-step reward random variable. MVPI enjoys great flexibility in that any policy…