Related papers: Long run risk sensitive portfolio with general fac…
Risk control and optimal diversification constitute a major focus in the finance and insurance industries as well as, more or less consciously, in our everyday life. We present a discussion of the characterization of risks and of the…
In this paper we consider an infinite time horizon risk-sensitive optimal stopping problem for a Feller--Markov process with an unbounded terminal cost function. We show that in the unbounded case an associated Bellman equation may have…
This paper investigates the problem of ensembling multiple strategies for sequential portfolios to outperform individual strategies in terms of long-term wealth. Due to the uncertainty of strategies' performances in the future market, which…
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…
In a fixed time horizon, appropriately executing a large amount of a particular asset -- meaning a considerable portion of the volume traded within this frame -- is challenging. Especially for illiquid or even highly liquid but also highly…
The question of optimal portfolio is addressed. The conventional Markowitz portfolio optimisation is discussed and the shortcomings due to non-Gaussian security returns are outlined. A method is proposed to minimise the likelihood of…
We consider a single-period portfolio selection problem for an investor, maximizing the expected ratio of the portfolio utility and the utility of a best asset taken in hindsight. The decision rules are based on the history of stock returns…
The classical discrete time model of proportional transaction costs relies on the assumption that a feasible portfolio process has solvent increments at each step. We extend this setting in two directions, allowing for convex transaction…
In this paper, we propose a novel investment strategy for portfolio optimization problems. The proposed strategy maximizes the expected portfolio value bounded within a targeted range, composed of a conservative lower target representing a…
We study the portfolio problem of maximizing the outperformance probability over a random benchmark through dynamic trading with a fixed initial capital. Under a general incomplete market framework, this stochastic control problem can be…
This paper develops a model of reference-dependent assessment of subjective beliefs in which loss-averse people optimally choose the expectation as the reference point to balance the current felicity from the optimistic anticipation and the…
This paper re-examines the problem of estimating risk premia in linear factor pricing models. Typically, the data used in the empirical literature are characterized by weakness of some pricing factors, strong cross-sectional dependence in…
Merton portfolio management problem is studied in this paper within a stochastic volatility, non constant time discount rate, and power utility framework. This problem is time inconsistent and the way out of this predicament is to consider…
This is a companion paper of [Mixed equilibrium solution of time-inconsistent stochastic LQ problem, arXiv:1802.03032], where general theory has been established to characterize the open-loop equilibrium control, feedback equilibrium…
We study the optimal portfolio liquidation problem over a finite horizon in a limit order book with bid-ask spread and temporary market price impact penalizing speedy execution trades. We use a continuous-time modeling framework, but in…
What is the best market-neutral implementation of classical Equity Factors? Should one use the specific predictability of the short-leg to build a zero beta Long-Short portfolio, in spite of the specific costs associated to shorting, or is…
We study the optimal investment and proportional reinsurance problem of an insurance company, whose investment preferences are described via a forward dynamic utility of exponential type in a stochastic factor model allowing for a possible…
The objective in a traditional reinforcement learning (RL) problem is to find a policy that optimizes the expected value of a performance metric such as the infinite-horizon cumulative discounted or long-run average cost/reward. In…
Possibilistic risk theory starts from the hypothesis that risk is modelled by fuzzy numbers. In particular, in a possibilistic portfolio choice problem, the return of a risky asset will be a fuzzy number. The expected utility operators have…
We develop a general theory of risk measures that determines the optimal amount of capital to raise and invest in a portfolio of reference traded securities in order to meet a pre-specified regulatory requirement. The distinguishing feature…