Related papers: Replica Analysis for Portfolio Optimization with S…
This paper investigates how to measure common market risk factors using newly proposed Panel Quantile Regression Model for Returns. By exploring the fact that volatility crosses all quantiles of the return distribution and using penalized…
Mean-reverting behavior of individuals assets is widely known in financial markets. In fact, we can construct a portfolio that has mean-reverting behavior and use it in trading strategies to extract profits. In this paper, we show that we…
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…
The article attempts to find an algebraic formula describing the correlation coefficients between random variables and the principal components representing them. As a result of the analysis, starting from selected statistics relating to…
Attempts to allocate capital across a selection of different investments are often hampered by the fact that investors' decisions are made under limited information (no historical return data) and during an extremely limited timeframe.…
We consider optimal allocation problems with Conditional Value-At-Risk (CVaR) constraint. We prove, under very mild assumptions, the convergence of the Sample Average Approximation method (SAA) applied to this problem, and we also exhibit a…
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…
This paper studies an optimal investing problem for a retiree facing longevity risk and living standard risk. We formulate the investing problem as a portfolio choice problem under a time-varying risk capacity constraint. We derive the…
We find economically and statistically significant gains when using machine learning for portfolio allocation between the market index and risk-free asset. Optimal portfolio rules for time-varying expected returns and volatility are…
Motivated by practical applications, we explore the constrained multi-period mean-variance portfolio selection problem within a market characterized by a dynamic factor model. This model captures predictability in asset returns driven by…
We extend and test empirically the multifractal model of asset returns based on a multiplicative cascade of volatilities from large to small time scales. The multifractal description of asset fluctuations is generalized into a multivariate…
We introduce a new dynamic factor correlation model with a novel variation-free parametrization of factor loadings. The model is applicable to high dimensions and can accommodate time-varying correlations, heterogeneous heavy-tailed…
Computational models of complex systems are usually elaborate and sensitive to implementation details, characteristics which often affect their verification and validation. Model replication is a possible solution to this issue. It avoids…
We develop a general approach for stress testing correlations of financial asset portfolios. The correlation matrix of asset returns is specified in a parametric form, where correlations are represented as a function of risk factors, such…
Using Random Matrix Theory one can derive exact relations between the eigenvalue spectrum of the covariance matrix and the eigenvalue spectrum of its estimator (experimentally measured correlation matrix). These relations will be used to…
In this paper, we revisit the portfolio allocation problem with designated risk-budget [Qian, 2005]. We generalize the problem of arbitrary risk budgets with unequal correlations to one that includes return forecasts and transaction costs…
Beta-sorted portfolios -- portfolios comprised of assets with similar covariation to selected risk factors -- are a popular tool in empirical finance to analyze models of (conditional) expected returns. Despite their widespread use, little…
Correlation matrices inferred from stock return time series contain information on the behaviour of the market, especially on clusters of highly correlating stocks. Here we study a subset of New York Stock Exchange (NYSE) traded stocks and…
In data centers, data replication is the primary method used to ensure availability of customer data. To avoid correlated failure, cloud storage infrastructure providers model hierarchical failure domains using a tree, and avoid placing a…
The optimal allocation of assets has been widely discussed with the theoretical analysis of risk measures, and pessimism is one of the most attractive approaches beyond the conventional optimal portfolio model. The $\alpha$-risk plays a…