Related papers: Time Consistent Behavior Portfolio Policy for Dyna…
This article studies a portfolio optimization problem, where the market consisting of several stocks is modeled by a multi-dimensional jump-diffusion process with age-dependent semi-Markov modulated coefficients. We study risk sensitive…
We study a variance reduction strategy based on control variables for simulating the averaged macroscopic behavior of a stochastic slow-fast system. We assume that this averaged behavior can be written in terms of a few slow degrees of…
In this paper, we introduce a large system of interacting financial agents in which each agent is faced with the decision of how to allocate his capital between a risky stock or a risk-less bond. The investment decision of investors,…
In this paper, we are concerned with the optimization of a dynamic investment portfolio when the securities which follow a multivariate Merton model with dependent jumps are periodically invested and proceed by approximating the…
We propose a fast and flexible method to scale multivariate return volatility predictions up to high-dimensions using a dynamic risk factor model. Our approach increases parsimony via time-varying sparsity on factor loadings and is able to…
The aim of this paper is to examine the time scaling of the semivariance when returns are modeled by various types of jump-diffusion processes, including stochastic volatility models with jumps in returns and in volatility. In particular,…
In this paper, we propose a new class of optimization problems, which maximize the terminal wealth and accumulated consumption utility subject to a mean variance criterion controlling the final risk of the portfolio. The multiple-objective…
In this report we derive the strategic (deterministic) allocation to bonds and stocks resulting in the optimal mean-variance trade-off on a given investment horizon. The underlying capital market features a mean-reverting process for equity…
This paper investigates dynamic and static fund separations and their stability for long-term optimal investments under three model classes. An investor maximizes the expected utility with constant relative risk aversion under an incomplete…
The use of factor stochastic volatility models requires choosing the number of latent factors used to describe the dynamics of the financial returns process; however, empirical evidence suggests that the number and makeup of pertinent…
This study provides the solution to the equity premium puzzle. The new model was developed by including the behavior of investors toward risk in financial markets in prior studies. The calculations of this newly tested model show that the…
In this paper we derive the exact solution of the multi-period portfolio choice problem for an exponential utility function under return predictability. It is assumed that the asset returns depend on predictable variables and that the joint…
Obtaining reliable estimates of conditional covariance matrices is an important task of heteroskedastic multivariate time series. In portfolio optimization and financial risk management, it is crucial to provide measures of uncertainty and…
Accurate volatility forecasts are vital in modern finance for risk management, portfolio allocation, and strategic decision-making. However, existing methods face key limitations. Fully multivariate models, while comprehensive, are…
Risk management is very important for individual investors or companies. There are many ways to measure the risk of investment. Prices of risky assets vary rapidly and randomly due to the complexity of finance market. Random interval is a…
Value-at-Risk (VaR) and Conditional Value-at-Risk (CVaR) are popular risk measures from academic, industrial and regulatory perspectives. The problem of minimizing CVaR is theoretically known to be of Neyman-Pearson type binary solution. We…
In finance, sequential decision problems are often faced, for which reinforcement learning (RL) emerges as a promising tool for optimisation without the need of analytical tractability. However, the objective of classical RL is the expected…
This paper studies a continuous-time portfolio selection problem under a general distribution of random risk aversion (RRA). We provide a complete characterization of all deterministic equilibrium strategies in closed form. Our results show…
This paper studies a variation of the continuous-time mean-variance portfolio selection where a tracking-error penalization is added to the mean-variance criterion. The tracking error term penalizes the distance between the allocation…
The monotone mean-variance (MMV) preference proposed by Maccheroni, et al. (Math. Finance 19(3): 487-521, 2009) fails to differentiate strictly dominant payoffs, which may cause inconsistency in portfolio decision-making. This paper…