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This paper studies the robust optimal gain selection problem for financial trading systems, formulated within a \emph{double linear policy} framework, which allocates capital across long and short positions. The key objective is to…
Diversification of an investment into independently fluctuating assets reduces its risk. In reality, movement of assets are are mutually correlated and therefore knowledge of cross--correlations among asset price movements are of great…
This paper considers mean-variance optimization under uncertainty, specifically when one desires a sparsified set of optimal portfolio weights. From the standpoint of a Bayesian investor, our approach produces a small portfolio from many…
The currency carry trade is the investment strategy that involves selling low interest rate currencies in order to purchase higher interest rate currencies, thus profiting from the interest rate differentials. This is a well known financial…
The Markowitz problem consists of finding in a financial market a self-financing trading strategy whose final wealth has maximal mean and minimal variance. We study this in continuous time in a general semimartingale model and under cone…
This paper studies the problem of maximizing expected utility from terminal wealth in a semi-static market composed of derivative securities, which we assume can be traded only at time zero, and of stocks, which can be traded continuously…
We study the problem of optimal dividend payout from a surplus process governed by Brownian motion with drift under the additional constraint of ratcheting, i.e. the dividend rate can never decrease. We solve the resulting two-dimensional…
Empirical studies indicate the presence of multi-scales in the volatility of underlying assets: a fast-scale on the order of days and a slow-scale on the order of months. In our previous works, we have studied the portfolio optimization…
This article considers a model for alternative processes for securities prices and compares this model with actual return data of several securities. The distributions of returns that appear in the model can be Gaussian as well as…
This study considers a model of the income distribution of agents whose pairwise interaction is asymmetric and price-invariant. Asymmetric transactions are typical for chain-trading groups who arrange their business such that commodities…
In this paper we provide a comprehensive analysis of a structural model for the dynamics of prices of assets traded in a market originally proposed in [1]. The model takes the form of an interacting generalization of the geometric Brownian…
This paper investigates well posedness of utility maximization problems for financial markets where stock returns depend on a hidden Gaussian mean reverting drift process. Since that process is potentially unbounded, well posedness cannot…
In this paper we investigate a utility maximization problem with drift uncertainty in a multivariate continuous-time Black-Scholes type financial market which may be incomplete. We impose a constraint on the admissible strategies that…
We study the problem of optimal portfolio selection in an illiquid market with discrete order flow. In this market, bids and offers are not available at any time but trading occurs more frequently near a terminal horizon. The investor can…
The steady-state turnover of a trading strategy is of clear interest to practitioners and portfolio managers, as is the steady-state Sharpe ratio. In this article, we show that in a convenient Gaussian process model, the steady-state…
In this paper we study a class of time-inconsistent terminal Markovian control problems in discrete time subject to model uncertainty. We combine the concept of the sub-game perfect strategies with the adaptive robust stochastic to tackle…
We conduct a preliminary analysis of a pairs trading strategy using the Ornstein-Uhlenbeck (OU) process to model stock price spreads. We compare this approach to a naive pairs trading strategy that uses a rolling window to calculate mean…
In this paper, we consider the problem of optimization of a portfolio consisting of securities. An investor with an initial capital, is interested in constructing a portfolio of securities. If the prices of securities change, the investor…
In this article we introduce a portfolio optimisation framework, in which the use of rough path signatures (Lyons, 1998) provides a novel method of incorporating path-dependencies in the joint signal-asset dynamics, naturally extending…
We consider the multi-period portfolio optimization problem with a single asset that can be held long or short. Due to the presence of transaction costs, maximizing the immediate reward at each period may prove detrimental, as frequent…