Related papers: Optimal risk allocation in a market with non-conve…
The ranking and selection problem is a popular framework in the simulation literature for studying optimal information collection. We study a version of this problem in which the simulation output for each design is normally distributed…
The problem of minimizing convex functionals of probability distributions is solved under the assumption that the density of every distribution is bounded from above and below. A system of sufficient and necessary first-order optimality…
We propose an computational framework for real-time risk assessment and prioritizing for random outcomes without prior information on probability distributions. The basic model is built based on satisficing measure (SM) which yields a…
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…
Any optimization algorithm based on the risk parity approach requires the formulation of portfolio total risk in terms of marginal contributions. In this paper we use the independence of the underlying factors in the market to derive the…
The dynamic portfolio optimization problem in finance frequently requires learning policies that adhere to various constraints, driven by investor preferences and risk. We motivate this problem of finding an allocation policy within a…
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 propose a risk measurement approach for a risk-averse stochastic problem. We provide results that guarantee that our problem has a solution. We characterize and explore the properties of the argmin as a risk measure and the minimum as a…
We introduce a two-agent problem which is inspired by price asymmetry arising from funding difference. When two parties have different funding rates, the two parties deduce different fair prices for derivative contracts even under the same…
Risk-neutral pricing dictates that the discounted derivative price is a martingale in a measure equivalent to the economic measure. The residual ambiguity for incomplete markets is here resolved by minimising the entropy of the price…
A new framework for portfolio diversification is introduced which goes beyond the classical mean-variance approach and portfolio allocation strategies such as risk parity. It is based on a novel concept called portfolio dimensionality that…
Portfolio sorting is ubiquitous in the empirical finance literature, where it has been widely used to identify pricing anomalies. Despite its popularity, little attention has been paid to the statistical properties of the procedure. We…
By adopting a distributional viewpoint on law-invariant convex risk measures, we construct dynamics risk measures (DRMs) at the distributional level. We then apply these DRMs to investigate Markov decision processes, incorporating latent…
Mean-deviation models, along with the existing theory of coherent risk measures, are well studied in the literature. In this paper, we characterize monotonic mean-deviation (risk) measures from a general mean-deviation model by applying a…
Portfolio optimization is an important process in finance that consists in finding the optimal asset allocation that maximizes expected returns while minimizing risk. When assets are allocated in discrete units, this is a combinatorial…
In this paper, we study the portfolio optimization problem with general utility functions and when the return and volatility of underlying asset are slowly varying. An asymptotic optimal strategy is provided within a specific class of…
An investor with constant relative risk aversion and an infinite planning horizon trades a risky and a safe asset with constant investment opportunities, in the presence of small transaction costs and a binding exogenous portfolio…
The dual risk model is a popular model in finance and insurance, which is often used to model the wealth process of a venture capital or high tech company. Optimal dividends have been extensively studied in the literature for a dual risk…
Minimizing volatility and adjustment costs is of central importance in many economic environments, yet it is often complicated by evolving feasibility constraints. We study a decision maker who repeatedly selects an action from a…
According to the fundamental theorems of welfare economics, any competitive equilibrium is Pareto efficient. Unfortunately, competitive equilibrium prices only exist under strong assumptions such as perfectly divisible goods and convex…