Related papers: On minimising a portfolio's shortfall probability
We study the portfolio selection problem of a long-run investor who is maximising the asymptotic growth rate of her expected utility. We show that, somewhat surprisingly, it is essentially not affected by introduction of a floor constraint…
We study the consistency of sample mean-variance portfolios of arbitrarily high dimension that are based on Bayesian or shrinkage estimation of the input parameters as well as weighted sampling. In an asymptotic setting where the number of…
While absence of arbitrage in frictionless financial markets requires price processes to be semimartingales, non-semimartingales can be used to model prices in an arbitrage-free way, if proportional transaction costs are taken into account.…
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…
We investigate an optimal investment problem with a general performance criterion which, in particular, includes discontinuous functions. Prices are modeled as diffusions and the market is incomplete. We find an explicit solution for the…
We show that financial correlations exhibit a non-trivial dynamic behavior. We introduce a simple phenomenological model of a multi-asset financial market, which takes into account the impact of portfolio investment on price dynamics. This…
We study the continuous time portfolio optimization model on the market where the mean returns of individual securities or asset categories are linearly dependent on underlying economic factors. We introduce the functional $Q_\gamma$…
A constant weight asset allocation is a popular investment strategy and is optimal under a suitable continuous model. We study the tracking error for the target continuous rebalancing strategy by a feasible discrete-in-time rebalancing…
We investigate how and when to diversify capital over assets, i.e., the portfolio selection problem, from a signal processing perspective. To this end, we first construct portfolios that achieve the optimal expected growth in i.i.d.…
Motivated by practical applications, we explore the constrained multi-period mean-variance portfolio selection problem within a market characterized by a dynamic factor model. This model captures predictability in asset returns driven by…
This paper investigates a continuous-time portfolio optimization problem with the following features: (i) a no-short selling constraint; (ii) a leverage constraint, that is, an upper limit for the sum of portfolio weights; and (iii) a…
Assume (1) asset returns follow a stochastic multi-factor process with time-varying conditional expectations; (2) investments are linear functions of factors. This paper calculates asymptotic joint moments of the logarithm of investor's…
We assume that an individual invests in a financial market with one riskless and one risky asset, with the latter's price following geometric Brownian motion as in the Black-Scholes model. Under a constant rate of consumption, we find the…
This paper studies a robust portfolio optimization problem under the multi-factor volatility model introduced by Christoffersen et al. (2009). The optimal strategy is derived analytically under the worst-case scenario with or without…
In this paper we consider the problem of minimising drawdown in a portfolio of financial assets. Here drawdown represents the relative opportunity cost of the single best missed trading opportunity over a specified time period. We formulate…
We consider the problem of maximizing the asymptotic growth rate of an investor under drift uncertainty in the setting of stochastic portfolio theory (SPT). As in the work of Kardaras and Robertson we take as inputs (i) a Markovian…
It is widely recognized that when classical optimal strategies are applied with parameters estimated from data, the resulting portfolio weights are remarkably volatile and unstable over time. The predominant explanation for this is the…
A drawdown constraint forces the current wealth to remain above a given function of its maximum to date. We consider the portfolio optimisation problem of maximising the long-term growth rate of the expected utility of wealth subject to a…
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…
We analyze the consumption-portfolio selection problem of an investor facing both Brownian and jump risks. We bring new tools, in the form of orthogonal decompositions, to bear on the problem in order to determine the optimal portfolio in…