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Value-at-Risk is one of the most popular risk management tools in the financial industry. Over the past 20 years several attempts to include VaR in the portfolio selection process have been proposed. However, using VaR as a risk measure in…
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…
To improve the efficient frontier of the classical mean-variance model in continuous time, we propose a varying terminal time mean-variance model with a constraint on the mean value of the portfolio asset, which moves with the varying…
This paper considers a utility maximization and optimal asset allocation problem in the presence of a stochastic endowment that cannot be fully hedged through trading in the financial market. After studying continuity properties of the…
We consider an illiquid financial market where a risk averse investor has to liquidate a portfolio within a finite time horizon [0,T] and can trade continuously at a traditional exchange (the "primary venue") and in a dark pool. At the…
This paper investigates optimal portfolio strategies in a market where the drift is driven by an unobserved Markov chain. Information on the state of this chain is obtained from stock prices and expert opinions in the form of signals at…
Empirical studies indicate the presence of multi-scales in the volatility of underlying assets: a fast-scale on the order of days and a slow-scale on the order of months. In our previous works, we have studied the portfolio optimization…
We study the optimal liquidation problem in a market model where the bid price follows a geometric pure jump process whose local characteristics are driven by an unobservable finite-state Markov chain and by the liquidation rate. This model…
A new methodology has been introduced to clean the correlation matrix of single stocks returns based on a constrained principal component analysis using financial data. Portfolios were introduced, namely "Fundamental Maximum Variance…
In this paper we consider an optimal investment and reinsurance problem with partially unknown model parameters which are allowed to be learned. The model includes multiple business lines and dependence between them. The aim is to maximize…
In this paper, we document a novel machine learning based bottom-up approach for static and dynamic portfolio optimization on, potentially, a large number of assets. The methodology applies to general constrained optimization problems and…
We consider the valuation problem of an (insurance) company under partial information. Therefore we use the concept of maximizing discounted future dividend payments. The firm value process is described by a diffusion model with constant…
We study an optimal dividend problem under a bankruptcy constraint. Firms face a trade-off between potential bankruptcy and extraction of profits. In contrast to previous works, general cash flow drifts, including Ornstein--Uhlenbeck and…
In this paper we study a class of time-inconsistent terminal Markovian control problems in discrete time subject to model uncertainty. We combine the concept of the sub-game perfect strategies with the adaptive robust stochastic to tackle…
In this work, we consider the optimal portfolio selection problem under hard constraints on trading volume amounts when the dynamics of the risky asset returns are governed by a discrete-time approximation of the Markov-modulated geometric…
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…
In this paper we estimate the mean-variance portfolio in the high-dimensional case using the recent results from the theory of random matrices. We construct a linear shrinkage estimator which is distribution-free and is optimal in the sense…
We employ model predictive control for a multi-period portfolio optimization problem. In addition to the mean-variance objective, we construct a portfolio whose allocation is given by model predictive control with a risk-parity objective,…
Mean-reverting behavior of individuals assets is widely known in financial markets. In fact, we can construct a portfolio that has mean-reverting behavior and use it in trading strategies to extract profits. In this paper, we show that we…
We investigate the optimal strategy over a finite time horizon for a portfolio of stock and bond and a derivative in an multiplicative Markovian market model with transaction costs (friction). The optimization problem is solved by a…