Related papers: Wright meets Markowitz: How standard portfolio the…
Modern Portfolio Theory (MPT) prescribes how to maximise the return of an asset portfolio for a given level of risk. The optimal trade-off between return and variance defines the efficient frontier. Whether actual cryptoasset portfolios…
The standard approach for constructing a Mean-Variance portfolio involves estimating parameters for the model using collected samples. However, since the distribution of future data may not resemble that of the training set, the…
Traditional Markowitz portfolio optimization constrains daily portfolio variance to a target value, optimising returns, Sharpe or variance within this constraint. However, this approach overlooks the relationship between variance at…
Recognizing that asset markets generally exhibit shared informational characteristics, we develop a portfolio strategy based on transfer learning that leverages cross-market information to enhance the investment performance in the market of…
The time dependence of the recently introduced minimum spanning tree description of correlations between stocks, called the ``asset tree'' have been studied to reflect the economic taxonomy. The nodes of the tree are identified with stocks…
Traditional portfolio management methods can incorporate specific investor preferences but rely on accurate forecasts of asset returns and covariances. Reinforcement learning (RL) methods do not rely on these explicit forecasts and are…
Given two random realized returns on an investment, which is to be preferred? This is a fundamental problem in finance that has no definitive solution except in the case one investment always returns more than the other. In 1952 Markowitz…
The potential benefits of portfolio diversification have been known to investors for a long time. Markowitz (1952) suggested the seminal approach for optimizing the portfolio problem based on finding the weights as budget shares that…
The variance measures the portfolio risks the investors are taking. The investor, who holds his portfolio and doesn't trade his shares, at the current time can use the time series of the market trades that were made during the averaging…
We present the unified market-based description of returns and variances of the trades with shares of a particular security, of the trades with shares of all securities in the market, and of the trades with the market portfolio. We consider…
Protecting against cyber-threats is vital for every organization and can be done by investing in cybersecurity controls and purchasing cyber insurance. However, these are interlinked since insurance premiums could be reduced by investing…
We propose to solve large scale Markowitz mean-variance (MV) portfolio allocation problem using reinforcement learning (RL). By adopting the recently developed continuous-time exploratory control framework, we formulate the exploratory MV…
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 consider an investor facing a classical portfolio problem of optimal investment in a log-Brownian stock and a fixed-interest bond, but constrained to choose portfolio and consumption strategies that reduce a dynamic shortfall risk…
Cryptocurrencies (CCs) have risen rapidly in market capitalization over the last years. Despite striking price volatility, their high average returns have drawn attention to CCs as alternative investment assets for portfolio and risk…
In online portfolio optimization the investor makes decisions based on new, continuously incoming information on financial assets (typically their prices). In our study we consider a learning algorithm, namely the Kiefer--Wolfowitz version…
In a reinforcement learning (RL) framework, we study the exploratory version of the continuous time expected utility (EU) maximization problem with a portfolio constraint that includes widely-used financial regulations such as short-selling…
Modeling and managing portfolio risk is perhaps the most important step to achieve growing and preserving investment performance. Within the modern portfolio construction framework that built on Markowitz's theory, the covariance matrix of…
As the cornerstone of modern portfolio theory, Markowitz's mean-variance optimization is considered a major model adopted in portfolio management. However, due to the difficulty of estimating its parameters, it cannot be applied to all…
In this work, we study a dynamic portfolio optimization problem related to pairs trading, which is an investment strategy that matches a long position in one security with a short position in another security with similar characteristics.…