Related papers: On long term investment optimality
The dynamic portfolio optimization problem in finance frequently requires learning policies that adhere to various constraints, driven by investor preferences and risk. We motivate this problem of finding an allocation policy within a…
The most commonly accepted model for investors' preferences is expected utility theory. More recently, other theories have emerged and pose new challenges to mathematics. The present paper treats preferences of cumulative prospect theory…
We study an optimal investment/consumption problem in a model capturing market and credit risk dependencies. Stochastic factors drive both the default intensity and the volatility of the stocks in the portfolio. We use the martingale…
The standard approach for constructing a Mean-Variance portfolio involves estimating parameters for the model using collected samples. However, since the distribution of future data may not resemble that of the training set, the…
We hypothesize that portfolio sorts based on the V/P ratio generate excess returns and consist of companies that are undervalued for prolonged periods. Results, for the US market show that high V/P portfolios outperform low V/P portfolios…
The optimal strategies for a long-term static investor are studied. Given a portfolio of a stock and a bond, we derive the optimal allocation of the capitols to maximize the expected long-term growth rate of a utility function of the…
In recent years, the evaluation of the minimal investment risk of the quenched disordered system of a portfolio optimization problem and the investment concentration of the optimal portfolio has been actively investigated using the analysis…
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…
This paper considers the portfolio management problem of optimal investment, consumption and life insurance. We are concerned with time inconsistency of optimal strategies. Natural assumptions, like different discount rates for consumption…
We consider a single-period portfolio selection problem for an investor, maximizing the expected ratio of the portfolio utility and the utility of a best asset taken in hindsight. The decision rules are based on the history of stock returns…
We study portfolio selection in a complete continuous-time market where the preference is dictated by the rank-dependent utility. As such a model is inherently time inconsistent due to the underlying probability weighting, we study the…
In this paper, we consider the portfolio optimization problem in a financial market under a general utility function. Empirical results suggest that if a significant market fluctuation occurs, invested wealth tends to have a notable change…
This paper examines an optimal investment problem in a continuous-time (essentially) complete financial market with a finite horizon. We deal with an investor who behaves consistently with principles of Cumulative Prospect Theory, and whose…
A fractal approach to the long-short portfolio optimization is proposed. The algorithmic system based on the composition of market-neutral spreads into a single entity was considered. The core of the optimization scheme is a fractal walk…
In this paper, we investigate a portfolio selection problem with transaction costs under a two-factor stochastic volatility structure, where volatility follows a mean-reverting process with a stochastic mean-reversion level. The model…
Markets have internal dynamics leading to excess volatility and other phenomena that are difficult to explain using rational expectations models. This paper studies these using a nonequilibrium price formation rule, developed in the context…
We consider a multi-stock continuous time incomplete market model with random coefficients. We study the investment problem in the class of strategies which do not use direct observations of the appreciation rates of the stocks, but rather…
In this paper, we define probabilistic measures for venture portfolio performance based on individual outlier probability for each investment and the dependence across investments. This work is inspired by loan portfolio modeling against…
The field of portfolio selection is an active research topic, which combines elements and methodologies from various fields, such as optimization, decision analysis, risk management, data science, forecasting, etc. The modeling and…
Portfolio managers often evaluate performance relative to benchmark, usually taken to be the Standard & Poor 500 stock index fund. This relative portfolio wealth is defined as the absolute portfolio wealth divided by wealth from investing…