Related papers: Sharpe portfolio using a cross-efficiency evaluati…
Based on a recent theorem due to the authors, it is shown how the extreme tail dependence between an asset and a factor or index or between two assets can be easily calibrated. Portfolios constructed with stocks with minimal tail dependence…
We study the relationship between model complexity and out-of-sample performance in the context of mean-variance portfolio optimization. Representing model complexity by the number of assets, we find that the performance of low-dimensional…
Hedge Funds are considered as one of the portfolio management sectors which shows a fastest growing for the past decade. An optimal Hedge Fund management requires an appropriate risk metrics. The classic CAPM theory and its Ratio Sharpe…
In the market place, diversification reduces risk and provides protection against extreme events by ensuring that one is not overly exposed to individual occurrences. We argue that diversification is best measured by characteristics of the…
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,…
We study the finite horizon Merton portfolio optimization problem in a general local-stochastic volatility setting. Using model coefficient expansion techniques, we derive approximations for the both the value function and the optimal…
This article is the term paper of the course Investments. We mainly focus on modeling long-term investment decisions of a typical utility-maximizing individual, with features of Chinese stock market in perspective. We adopt an OR based…
We consider the estimation of the multi-period optimal portfolio obtained by maximizing an exponential utility. Employing Jeffreys' non-informative prior and the conjugate informative prior, we derive stochastic representations for the…
In financial markets marked by inherent volatility, extreme events can result in substantial investor losses. This paper proposes a portfolio strategy designed to mitigate extremal risks. By applying extreme value theory, we evaluate the…
We attempt to mitigate the persistent tradeoff between risk and return in medium- to long-term portfolio management. This paper proposes a novel LLM-guided no-regret portfolio allocation framework that integrates online learning dynamics,…
In this note, we introduce how to use Volatility Index (VIX) for postprocessing quantitative strategies so as to increase the Sharpe ratio and reduce trading risks. The signal from this procedure is an indicator of trading or not on a daily…
We consider the problem of finding the efficient frontier associated with the risk-return portfolio optimization model. We derive the analytical expression of the efficient frontier for a portfolio of N risky assets, and for the case when a…
Managing risk in dynamic decision problems is of cardinal importance in many fields such as finance and process control. The most common approach to defining risk is through various variance related criteria such as the Sharpe Ratio or the…
We describe a post hoc test for the Sharpe ratio, analogous to Tukey's test for pairwise equality of means. The test can be applied after rejection of the hypothesis that all population Signal-Noise ratios are equal. The test is applicable…
In this article, inspired by Shi, et al. we investigate the optimal portfolio selection with one risk-free asset and one risky asset in a multiple period setting under cumulative prospect theory (CPT). Compared with their study, our novelty…
We apply the procedure of Lee et al. to the problem of performing inference on the signal-noise ratio of the asset which displays maximum sample Sharpe ratio over a set of possibly correlated assets. We find a multivariate analogue of the…
Index tracking is a popular form of asset management. Typically, a quadratic function is used to define the tracking error of a portfolio and the look back approach is applied to solve the index tracking problem. We argue that a forward…
A constant rebalanced portfolio is an asset allocation algorithm which keeps the same distribution of wealth among a set of assets along a period of time. Recently, there has been work on on-line portfolio selection algorithms which are…
Every "x"-adjustment in the so-called xVA financial risk management framework relies on the computation of exposures. Considering thousands of Monte Carlo paths and tens of simulation steps, a financial portfolio needs to be evaluated…
We study dynamic optimal portfolio allocation for monotone mean--variance preferences in a general semimartingale model. Armed with new results in this area we revisit the work of Cui, Li, Wang and Zhu (2012, MAFI) and fully characterize…