Related papers: Risk minimization and portfolio diversification
In this work, we consider the optimal portfolio selection problem under hard constraints on trading amounts, transaction costs and different rates for borrowing and lending when the risky asset returns are serially correlated. No…
We consider a portfolio optimisation problem for a utility-maximising investor who faces convex constraints on his portfolio allocation in Heston's stochastic volatility model. We apply the duality methods developed in previous work to…
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 an investor facing a classical portfolio problem of optimal investment in a log-Brownian stock and a fixed-interest bond, but constrained to choose portfolio and consumption strategies that reduce a dynamic shortfall risk…
In the present paper, the minimal investment risk for a portfolio optimization problem with imposed budget and investment concentration constraints is considered using replica analysis. Since the minimal investment risk is influenced by the…
We consider the problem of portfolio optimization with a correlation constraint. The framework is the multiperiod stochastic financial market setting with one tradable stock, stochastic income and a non-tradable index. The correlation…
We use a replica approach to deal with portfolio optimization problems. A given risk measure is minimized using empirical estimates of asset values correlations. We study the phase transition which happens when the time series is too short…
In recent years, the evaluation of the minimal investment risk of the quenched disordered system of a portfolio optimization problem and the investment concentration of the optimal portfolio has been actively investigated using the analysis…
This paper studies an optimal investing problem for a retiree facing longevity risk and living standard risk. We formulate the investing problem as a portfolio choice problem under a time-varying risk capacity constraint. We derive the…
We determine the optimal investment strategy in a Black-Scholes financial market to minimize the so-called {\it probability of drawdown}, namely, the probability that the value of an investment portfolio reaches some fixed proportion of its…
When assets are correlated, benefits of investment diversification are reduced. To measure the influence of correlations on investment performance, a new quantity - the effective portfolio size - is proposed and investigated in both…
We consider the hedging error of a derivative due to discrete trading in the presence of a drift in the dynamics of the underlying asset. We suppose that the trader wishes to find rebalancing times for the hedging portfolio which enable him…
For an exponential utility maximizing investment strategy in a Black-Scholes Setting, fixed upper and lower constraints are introduced on the terminal wealth. This is equivalent to combining the optimal strategy with options. The resulting…
We provide analytical results for a static portfolio optimization problem with two coherent risk measures. The use of two risk measures is motivated by joint decision-making for portfolio selection where the risk perception of the portfolio…
This paper solves a utility maximization problem under utility-based shortfall risk constraint, by proposing an approach using Lagrange multiplier and convex duality. Under mild conditions on the asymptotic elasticity of the utility…
Diversification of an investment into independently fluctuating assets reduces its risk. In reality, movement of assets are are mutually correlated and therefore knowledge of cross--correlations among asset price movements are of great…
We investigate an optimal investment problem with a general performance criterion which, in particular, includes discontinuous functions. Prices are modeled as diffusions and the market is incomplete. We find an explicit solution for the…
We consider the problem of optimal investment with random endowment in a Black--Scholes market for an agent with constant relative risk aversion. Using duality arguments, we derive an explicit expression for the optimal trading strategy,…
The investment risk minimization problem with budget and return constraints has been the subject of research using replica analysis but there are shortcomings in the extant literature. With respect to Tobin's separation theorem and the…
This paper studies the equity holders' mean-variance optimal portfolio choice problem for (non-)protected participating life insurance contracts. We derive explicit formulas for the optimal terminal wealth and the optimal strategy in the…