Related papers: Risk management under Omega measure
In this review, we provide practical guidance on some of the main machine learning tools used in portfolio weight formation. This is not an exhaustive list, but a fraction of the ones used and have some statistical analysis behind it. All…
This paper studies some unconventional utility maximization problems when the ratio type relative portfolio performance is periodically evaluated over an infinite horizon. Meanwhile, the agent is prohibited from short-selling stocks. Our…
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…
Financial experts and analysts seek to predict the variability of financial markets. In particular, the correct prediction of this variability ensures investors successful investments. However, there has been a big trend in finance in the…
Investors who optimize their portfolios under any of the coherent risk measures are naturally led to regularized portfolio optimization when they take into account the impact their trades make on the market. We show here that the impact…
We derive a closed form portfolio optimization rule for an investor who is diffident about mean return and volatility estimates, and has a CRRA utility. The novelty is that confidence is here represented using ellipsoidal uncertainty sets…
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)…
Optimal execution of a portfolio have been a challenging problem for institutional investors. Traders face the trade-off between average trading price and uncertainty, and traditional methods suffer from the curse of dimensionality. Here,…
We derive new results related to the portfolio choice problem for power and logarithmic utilities. Assuming that the portfolio returns follow an approximate log-normal distribution, the closed-form expressions of the optimal portfolio…
Traditional approaches to portfolio optimization, often rooted in Modern Portfolio Theory and solved via quadratic programming or evolutionary algorithms, struggle with scalability or flexibility, especially in scenarios involving complex…
We investigate whether sophisticated volatility estimation improves the out-of-sample performance of mean-variance portfolio strategies relative to the naive 1/N strategy. The portfolio strategies rely solely upon second moments. Using a…
In this paper, the optimal mean-reverting portfolio (MRP) design problem is considered, which plays an important role for the statistical arbitrage (a.k.a. pairs trading) strategy in financial markets. The target of the optimal MRP design…
In a two-period financial market where a stock is traded dynamically and European options at maturity are traded statically, we study the so-called martingale Schr\"odinger bridge Q*; that is, the minimal-entropy martingale measure among…
Systemic risk measures were introduced to capture the global risk and the corresponding contagion effects that is generated by an interconnected system of financial institutions. To this purpose, two approaches were suggested. In the first…
Active portfolio management tries to incorporate any source of meaningful information into the asset selection process. In this contribution we consider qualitative views specified as total orders of the expected asset returns and discuss…
In this paper we consider the strategic asset allocation of an insurance company. This task can be seen as a special case of portfolio optimization. In the 1950s, Markowitz proposed to formulate portfolio optimization as a bicriteria…
We consider the optimization of active extension portfolios. For this purpose, the optimization problem is rewritten as a stochastic programming model and solved using a clever multi-start local search heuristic, which turns out to provide…
This paper solves the dynamic portfolio choice problem. Using an explicit solution with a power utility, we construct a bridge between a continuous and discrete VAR model to assess portfolio sensitivities. We find, from a well analyzed…
Equivalent characterizations of multiportfolio time consistency are deduced for closed convex and coherent set-valued risk measures on $L^p(\Omega,\mathcal F, P; R^d)$ with image space in the power set of $L^p(\Omega,\mathcal F_t,P;R^d)$.…
We consider an investor, whose portfolio consists of a single risky asset and a risk free asset, who wants to maximize his expected utility of the portfolio subject to the Value at Risk assuming a heavy tail distribution of the stock prices…