Related papers: Wright meets Markowitz: How standard portfolio the…

We study the sensitivity to estimation error of portfolios optimized under various risk measures, including variance, absolute deviation, expected shortfall and maximal loss. We introduce a measure of portfolio sensitivity and test the…

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…

This paper is concerned with the maximum principle and dynamic programming principle for mean-variance portfolio selection of jump diffusions and their relationship. First, the optimal portfolio and efficient frontier of the problem are…

We consider the problem of finding the efficient frontier associated with the risk-return portfolio optimization model. We derive the analytical expression of the efficient frontier for a portfolio of N risky assets, and for the case when a…

We review recent progress in modeling credit risk for correlated assets. We start from the Merton model which default events and losses are derived from the asset values at maturity. To estimate the time development of the asset values, the…

This paper develops a method to derive optimal portfolios and risk premia explicitly in a general diffusion model for an investor with power utility and a long horizon. The market has several risky assets and is potentially incomplete.…

In the world of modern financial theory, portfolio construction has traditionally operated under at least one of two central assumptions: the constraints are derived from a utility function and/or the multivariate probability distribution…

The problem of portfolio management represents an important and challenging class of dynamic decision making problems, where rebalancing decisions need to be made over time with the consideration of many factors such as investors…

In this paper we consider a generalization of the Markowitz's Mean-Variance model under linear transaction costs and cardinality constraints. The cardinality constraints are used to limit the number of assets in the optimal portfolio. The…

The inputs and preferences of human users are important considerations in situations where these users interact with autonomous cyber or cyber-physical systems. In these scenarios, one is often interested in aligning behaviors of the system…

A new methodology has been introduced to clean the correlation matrix of single stocks returns based on a constrained principal component analysis using financial data. Portfolios were introduced, namely "Fundamental Maximum Variance…

At the heart of technology transitions lie complex processes of social and industrial dynamics. The quantitative study of sustainability transitions requires modelling work, which necessitates a theory of technology substitution. Many, if…

The minimum spanning tree, based on the concept of ultrametricity, is constructed from the correlation matrix of stock returns and provides a meaningful economic taxonomy of the stock market. In order to study the dynamics of this asset…

We propose a method for extending a given asset pricing formula to account for two additional sources of risk: the risk associated with future changes in market--calibrated parameters and the remaining risk associated with idiosyncratic…

In finance industry portfolio construction deals with how to divide the investors' wealth across an asset-classes' menu in order to maximize the investors' gain. Main approaches in use at the present are based on variations of the classical…

A decision-maker periodically acquires information about a changing state, controlling both the timing and content of updates. I characterize optimal policies using a decomposition of the dynamic problem into optimal stopping and static…

We develop a deep reinforcement learning framework for dynamic portfolio optimization that combines a Dirichlet policy with cross-sectional attention mechanisms. The Dirichlet formulation ensures that portfolio weights are always feasible,…

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…

Traditional approaches to financial asset allocation start with returns forecasting followed by an optimization stage that decides the optimal asset weights. Any errors made during the forecasting step reduce the accuracy of the asset…

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…