Related papers: On long term investment optimality
In this paper we study the optimal investment and reinsurance problem of an insurance company whose investment preferences are described via a forward dynamic exponential utility in a regime-switching market model. Financial and actuarial…
This paper studies the time-varying structure of the equity market with respect to market capitalization. First, we analyze the distribution of the 100 largest companies' market capitalizations over time, in terms of inequality,…
Motivated by the current fears of a potentially stagflationary global economic environment, this paper uses new and recently introduced mathematical techniques to study multivariate time series pertaining to country inflation (CPI),…
The optimization of large portfolios displays an inherent instability to estimation error. This poses a fundamental problem, because solutions that are not stable under sample fluctuations may look optimal for a given sample, but are, in…
Estimating the covariance of asset returns, i.e., the risk model, is a key component of financial portfolio construction and evaluation. Most risk modeling approaches produce a factor model that decomposes the asset variability into two…
We consider the problem of optimal portfolio selection under forward investment performance criteria in an incomplete market. The dynamics of the prices of the traded assets depend on a pair of stochastic factors, namely, a slow factor…
In this paper, we study a stochastic optimal control problem with stochastic volatility. We prove the sufficient and necessary maximum principle for the proposed problem. Then we apply the results to solve an investment, consumption and…
This work initiates research into the problem of determining an optimal investment strategy for investors with different attitudes towards the trade-offs of risk and profit. The probability distribution of the return values of the stocks…
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 consider an optimal investment and consumption problem for a Black-Scholes financial market with stochastic volatility and unknown stock appreciation rate. The volatility parameter is driven by an external economic factor modeled as a…
We introduce a pathwise approach to analyze the relative performance of an equity portfolio with respect to a benchmark market portfolio. In this energy-entropy framework, the relative performance is decomposed into three components: a…
The paper [12] examines a concept of equilibrium policies instead of optimal controls in stochastic optimization to analyze a mean-variance portfolio selection problem. We follow the same approach in order to investigate the Merton…
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…
We consider the life-cycle optimal portfolio choice problem faced by an agent receiving labor income and allocating her wealth to risky assets and a riskless bond subject to a borrowing constraint. In this paper, to reflect a realistic…
Portfolio optimization approaches inevitably rely on multivariate modeling of markets and the economy. In this paper, we address three sources of error related to the modeling of these complex systems: 1. oversimplifying hypothesis; 2.…
The present paper provides a study of high-dimensional statistical arbitrage that combines factor models with the tools from stochastic control, obtaining closed-form optimal strategies which are both interpretable and computationally…
The long-term impact of algorithmic decision making is shaped by the dynamics between the deployed decision rule and individuals' response. Focusing on settings where each individual desires a positive classification---including many…
Despite half a century of research, there is still no general agreement about the optimal approach to build a robust multi-period portfolio. We address this question by proposing the detrended cluster entropy approach to estimate the…
We study the problem of active portfolio management where an investor aims to outperform a benchmark strategy's risk profile while not deviating too far from it. Specifically, an investor considers alternative strategies whose terminal…
A portfolio of different stocks and a risk-less security whose composition is dynamically maintained stable by trading shares at any time step leads to a growth of the capital with a nonrandom rate. This is the key for the theory of…