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This paper investigates performance attribution measures as a basis for constraining portfolio optimization. We employ optimizations that minimize expected tail loss and investigate both asset allocation (AA) and the selection effect (SE)…
Classical mean-variance portfolio theory tells us how to construct a portfolio of assets which has the greatest expected return for a given level of return volatility. Utility theory then allows an investor to choose the point along this…
Portfolio optimization involves selecting asset weights to minimize a risk-reward objective, such as the portfolio variance in the classical minimum-variance framework. Sparse portfolio selection extends this by imposing a cardinality…
We consider the optimal risk transfer from an insurance company to a reinsurer. The problem formulation considered in this paper is closely connected to the optimal portfolio problem in finance, with some crucial distinctions. In…
We revisit mean-risk portfolio selection in a one-period financial market where risk is quantified by a positively homogeneous risk measure $\rho$. We first show that under mild assumptions, the set of optimal portfolios for a fixed return…
The paper solves the problem of optimal portfolio choice when the parameters of the asset returns distribution, like the mean vector and the covariance matrix are unknown and have to be estimated by using historical data of the asset…
We study the consistency of sample mean-variance portfolios of arbitrarily high dimension that are based on Bayesian or shrinkage estimation of the input parameters as well as weighted sampling. In an asymptotic setting where the number of…
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…
A new framework for portfolio diversification is introduced which goes beyond the classical mean-variance approach and portfolio allocation strategies such as risk parity. It is based on a novel concept called portfolio dimensionality that…
In this paper we consider the problem of minimising drawdown in a portfolio of financial assets. Here drawdown represents the relative opportunity cost of the single best missed trading opportunity over a specified time period. We formulate…
Value-at-Risk is one of the most popular risk management tools in the financial industry. Over the past 20 years several attempts to include VaR in the portfolio selection process have been proposed. However, using VaR as a risk measure in…
This paper studies a variation of the continuous-time mean-variance portfolio selection where a tracking-error penalization is added to the mean-variance criterion. The tracking error term penalizes the distance between the allocation…
A solution to a portfolio optimization problem is always conditioned by constraints on the initial capital and the price of the available market assets. If a risk neutral measure is known, then the price of each asset is the discounted…
In this paper, we consider the optimal portfolio liquidation problem under the dynamic mean-variance criterion and derive time-consistent solutions in three important models. We give adapted optimal strategies under a reconsidered…
We consider the problem of mean-variance portfolio optimization for a generic covariance matrix subject to the budget constraint and the constraint for the expected return, with the application of the replica method borrowed from the…
Prediction models are traditionally optimized independently from their use in the asset allocation decision-making process. We address this shortcoming and present a framework for integrating regression prediction models in a mean-variance…
This paper proposes a portfolio construction framework designed to remain robust under estimation error, non-stationarity, and realistic trading constraints. The methodology combines dynamic asset eligibility, deterministic rebalancing, and…
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…
This paper studies the portfolio optimization problem when the investor's utility is general and the return and volatility of the risky asset are fast mean-reverting, which are important to capture the fast-time scale in the modeling of…
Portfolio selection in the periodic investment of securities modeled by a multivariate Merton model with dependent jumps is considered. The optimization framework is designed to maximize expected terminal wealth when portfolio risk is…