Related papers: On portfolios generated by optimal transport
In this paper, we extend our convexity theory for $C^2$ cost functions in optimal transportation to more general generating functions, which were originally introduced by the second author to extend the framework of optimal transportation…
In the seminal work [9], several macroscopic market observables have been introduced, in an attempt to find characteristics capturing the diversity of a financial market. Despite the crucial importance of such observables for investment…
Optimal transport has become part of the standard quantitative economics toolbox. It is the framework of choice to describe models of matching with transfers, but beyond that, it allows to: extend quantile regression; identify discrete…
Utility and risk are two often competing measurements on the investment success. We show that efficient trade-off between these two measurements for investment portfolios happens, in general, on a convex curve in the two dimensional space…
For a functionally generated portfolio, there is a natural decomposition of the relative log-return into the log-change in the generating function and a drift process. In this note, this decomposition is extended to arbitrary stock…
In this paper, we consider the portfolio optimization problem in a financial market under a general utility function. Empirical results suggest that if a significant market fluctuation occurs, invested wealth tends to have a notable change…
We analyze characteristics' joint predictive information through the lens of out-of-sample power utility functions. Linking weights to characteristics to form optimal portfolios suffers from estimation error which we mitigate by maximizing…
Portfolio selection problems that optimize expected utility are usually difficult to solve. If the number of assets in the portfolio is large, such expected utility maximization problems become even harder to solve numerically. Therefore,…
We give a characterization of optimal transport plans for a variant of the usual quadratic transport cost introduced in [33]. Optimal plans are composition of a deterministic transport given by the gradient of a continuously differentiable…
In this paper we propose a novel application of Gaussian processes (GPs) to financial asset allocation. Our approach is deeply rooted in Stochastic Portfolio Theory (SPT), a stochastic analysis framework introduced by Robert Fernholz that…
We consider the following problem in stochastic portfolio theory. Are there portfolios that are relative arbitrages with respect to the market portfolio over very short periods of time under realistic assumptions? We answer a slightly…
We introduce a novel approach to portfolio optimization that leverages hierarchical graph structures and the Schur complement method to systematically reduce computational complexity while preserving full covariance information. Inspired by…
This paper studies a non-stochastic version of Fernholz's stochastic portfolio theory for a simple model of stock markets with continuous price paths. It establishes non-stochastic versions of the most basic results of stochastic portfolio…
The aim of this work is to extend the capital growth theory developed by Kelly, Breiman, Cover and others to asset market models with transaction costs. We define a natural generalization of the notion of a numeraire portfolio proposed by…
We study a mean-field version of rank-based models of equity markets such as the Atlas model introduced by Fernholz in the framework of Stochastic Portfolio Theory. We obtain an asymptotic description of the market when the number of…
We consider the terminal wealth utility maximization problem from the point of view of a portfolio manager who is paid by an incentive scheme, which is given as a convex function $g$ of the terminal wealth. The manager's own utility…
The paper studies problem of continuous time optimal portfolio selection for a incom- plete market diffusion model. It is shown that, under some mild conditions, near optimal strategies for investors with different performance criteria can…
Graphical models are a powerful tool to estimate a high-dimensional inverse covariance (precision) matrix, which has been applied for a portfolio allocation problem. The assumption made by these models is a sparsity of the precision matrix.…
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 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…