Related papers: Optimal portfolio selection under vanishing fixed …
Managing insurance and financial risk when data is limited is a key task in the insurance industry. In this paper, we focus on cases where the risk distribution is modeled as a mixture with some components estimable to high precision or…
Optimal trading strategies for pairs trading have been studied by models that try to find either optimal shares of stocks by assuming no transaction costs or optimal timing of trading fixed numbers of shares of stocks with transaction…
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…
We consider a robust asymptotic growth problem under model uncertainty in the presence of stochastic factors. We fix two inputs representing the instantaneous covariance for the asset price process $X$, which depends on an additional…
Optimal execution of a portfolio have been a challenging problem for institutional investors. Traders face the trade-off between average trading price and uncertainty, and traditional methods suffer from the curse of dimensionality. Here,…
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…
We consider the mean--variance portfolio optimization problem under the game theoretic framework and without risk-free assets. The problem is solved semi-explicitly by applying the extended Hamilton--Jacobi--Bellman equation. Although the…
We address a portfolio selection problem that combines active (outperformance) and passive (tracking) objectives using techniques from convex analysis. We assume a general semimartingale market model where the assets' growth rate processes…
This paper investigates the optimal investment problem in a market with two types of illiquidity: transaction costs and search frictions. Extending the framework established by arXiv:2101.09936, we analyze a power-utility maximization…
The family of admissible positions in a transaction costs model is a random closed set, which is convex in case of proportional transaction costs. However, the convexity fails, e.g. in case of fixed transaction costs or when only a finite…
Turnpike theorems state that if an investor's utility is asymptotically equivalent to a power utility, then the optimal investment strategy converges to the CRRA strategy as the investment horizon tends to infinity. This paper aims to…
We solve an expected utility-maximization problem with a Value-at-risk constraint on the terminal portfolio value in an incomplete financial market due to stochastic volatility. To derive the optimal investment strategy, we use the dynamic…
We study optimal investment in a financial market having a finite number of assets from a signal processing perspective. We investigate how an investor should distribute capital over these assets and when he should reallocate the…
We extend the classical mean-variance (MV) framework and propose a robust and sparse portfolio selection model incorporating an ellipsoidal uncertainty set to reduce the impact of estimation errors and fixed transaction costs to penalize…
In this paper, optimal consumption and investment decisions are studied for an investor who can invest in a fixed interest rate bank account and a stock whose price is a log normal diffusion. We present the method of the HJB equation in…
This paper studies the problem of optimal investment with CRRA (constant, relative risk aversion) preferences, subject to dynamic risk constraints on trading strategies. The market model considered is continuous in time and incomplete. the…
The subject of this paper is an optimal consumption/optimal portfolio problem with transaction costs and with multiple risky assets. In our model the transaction costs take a special form in that transaction costs on purchases of one of the…
The problem of portfolio allocation in the context of stocks evolving in random environments, that is with volatility and returns depending on random factors, has attracted a lot of attention. The problem of maximizing a power utility at a…
We introduce a price impact model which accounts for finite market depth, tightness and resilience. Its coupled bid- and ask-price dynamics induce convex liquidity costs. We provide existence of an optimal solution to the classical problem…
We consider partially observable Markov decision processes (POMDPs) with a set of target states and every transition is associated with an integer cost. The optimization objective we study asks to minimize the expected total cost till the…