Related papers: A new decomposition of portfolio return
The dissipation function for a system is defined as the natural logarithm of the ratio between probabilities of a trajectory and its time-reversed trajectory, and its probability distribution follows a well-known relation called the…
Disentangling irreversible and reversible forces from random fluctuations is a challenging problem in the analysis of stochastic trajectories measured from real-world dynamical systems. We present an approach to approximate the dynamics of…
Decomposition is the basis of works dedicated to business process modelling at the stage of information and management systems analysis and design. The article shows that the business process decomposition can be represented as a Galton…
The superposition of two independent point processes can be described by multiplication of their probability generating functionals (p.g.fl.s). The inverse operation, which can be viewed as a deconvolution, is defined by dividing the…
We present a method for constructing the log-optimal portfolio using the well-calibrated forecasts of market values. Dawid's notion of calibration and the Blackwell approachability theorem are used for computing well-calibrated forecasts.…
Investment returns naturally reside on irregular domains, however, standard multivariate portfolio optimization methods are agnostic to data structure. To this end, we investigate ways for domain knowledge to be conveniently incorporated…
Markov process is widely applied in almost all aspects of literature, especially important for understanding non-equilibrium processes. We introduce a decomposition to general Markov process in this paper. This decomposition decomposes the…
We develop a methodology for index tracking and risk exposure control using financial derivatives. Under a continuous-time diffusion framework for price evolution, we present a pathwise approach to construct dynamic portfolios of…
We propose a novel portfolio trading system, which contains a feature preprocessing module and a trading module. The feature preprocessing module consists of various data processing operations, while in the trading part, we integrate the…
As countless examples show, it can be fruitful to study a sequence of complicated objects all at once via the formalism of generating functions. We apply this point of view to the homology and combinatorics of orbit configuration spaces:…
In this paper we develop a concrete and fully implementable approach to the optimization of functionally generated portfolios in stochastic portfolio theory. The main idea is to optimize over a family of rank-based portfolios parameterized…
In the seminal work [9], several macroscopic market observables have been introduced, in an attempt to find characteristics capturing the diversity of a financial market. Despite the crucial importance of such observables for investment…
Stock trading has always been a challenging task due to the highly volatile nature of the stock market. Making sound trading decisions to generate profit is particularly difficult under such conditions. To address this, we propose four…
In this paper, we propose a data-driven sliding window approach to solve a log-optimal portfolio problem. In contrast to many of the existing papers, this approach leads to a trading strategy with time-varying portfolio weights rather than…
This paper develops a decomposition of standard Risk Contribution (RC) into two economically interpretable components: inherent risk and correlation risk. Using a leave-one-out representation, each position's RC separates into a term…
We extend and test empirically the multifractal model of asset returns based on a multiplicative cascade of volatilities from large to small time scales. The multifractal description of asset fluctuations is generalized into a multivariate…
An investment portfolio consists of $n$ algorithmic trading strategies, which generate vectors of positions in trading assets. Sign opposite trades (buy/sell) cross each other as strategies are combined in a portfolio. Then portfolio…
The driving force of the dynamical system can be decomposed into the gradient of a potential landscape and curl flux (current). The fluctuation-dissipation theorem (FDT) is often applied to near equilibrium systems with detailed balance.…
This paper investigates the optimal selection of portfolios for power utility maximizing investors in a financial market where stock returns depend on a hidden Gaussian mean reverting drift process. Information on the drift is obtained from…
This paper presents a novel one-factor stochastic volatility model where the instantaneous volatility of the asset log-return is a diffusion with a quadratic drift and a linear dispersion function. The instantaneous volatility mean reverts…