Related papers: Risk minimization and portfolio diversification
In this paper, we consider the portfolio optimization problem in a financial market under a general utility function. Empirical results suggest that if a significant market fluctuation occurs, invested wealth tends to have a notable change…
Portfolio selection problems that optimize expected utility are usually difficult to solve. If the number of assets in the portfolio is large, such expected utility maximization problems become even harder to solve numerically. Therefore,…
Efforts to apply economic complexity to identify diversification opportunities often rely on diagrams comparing the relatedness and complexity or products, technologies, or industries. Yer, the use of these diagrams is not based on…
Network theory proved recently to be useful in the quantification of many properties of financial systems. The analysis of the structure of investment portfolios is a major application since their eventual correlation and overlap impact the…
The idiosyncratic (microscopic) and systemic (macroscopic) components of market structure have been shown to be responsible for the departure of the optimal mean-variance allocation from the heuristic `equally-weighted' portfolio. In this…
This paper considers optimal control problem of a large insurance company under a fixed insolvency probability. The company controls proportional reinsurance rate, dividend pay-outs and investing process to maximize the expected present…
The optimal allocation of assets has been widely discussed with the theoretical analysis of risk measures, and pessimism is one of the most attractive approaches beyond the conventional optimal portfolio model. The $\alpha$-risk plays a…
Correlation clustering is a central problem in unsupervised learning, with applications spanning community detection, duplicate detection, automated labelling and many more. In the correlation clustering problem one receives as input a set…
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…
We consider a portfolio with call option and the corresponding underlying asset under the standard assumption that stock-market price represents a random variable with lognormal distribution. Minimizing the variance (hedging risk) of the…
The Portfolio Optimization task has long been studied in the Financial Services literature as a procedure to identify the basket of assets that satisfy desired conditions on the expected return and the associated risk. A well-known approach…
Focusing on gains & losses relative to a risk-free benchmark instead of terminal wealth, we consider an asset allocation problem to maximize time-consistently a mean-risk reward function with a general risk measure which is i)…
We investigate the portfolio selection problem against the systemic risk which is measured by CoVaR. We first demonstrate that the systemic risk of pure stock portfolios is essentially uncontrollable due to the contagion effect and the…
We investigate the ergodic problem of growth-rate maximization under a class of risk constraints in the context of incomplete, It\^{o}-process models of financial markets with random ergodic coefficients. Including {\em value-at-risk}…
Given multivariate time series, we study the problem of forming portfolios with maximum mean reversion while constraining the number of assets in these portfolios. We show that it can be formulated as a sparse canonical correlation analysis…
It is shown that the axioms for coherent risk measures imply that whenever there is an asset in a portfolio that dominates the others in a given sample (which happens with finite probability even for large samples), then this portfolio…
The evolution with time of the correlation structure of equity returns is studied by means of a filtered network approach investigating persistences and recurrences and their implications for risk diversification strategies. We build…
We consider a simplified model for optimizing a single-asset portfolio in the presence of transaction costs given a signal with a certain autocorrelation and cross-correlation structure. In our setup, the portfolio manager is given two…
Sparse index tracking is a prominent passive portfolio management strategy that constructs a sparse portfolio to track a financial index. A sparse portfolio is preferable to a full portfolio in terms of reducing transaction costs and…
We address the problem of partial index tracking, replicating a benchmark index using a small number of assets. Accurate tracking with a sparse portfolio is extensively studied as a classic finance problem. However in practice, a tracking…