Related papers: On portfolios generated by optimal transport
By employing the technique of enlargement of filtrations, we demonstrate how to incorporate information about the future trend of the stochastic interest rate process into a financial model. By modeling the interest rate as an affine…
The Black-Scholes-Merton model is a mathematical model for the dynamics of a financial market that includes derivative investment instruments, and its formula provides a theoretical price estimate of European-style options. The model's…
We demonstrate by mathematical analysis and systematic computer simulations that redistribution can lead to sustainable growth in a society. The human capital dynamics of each agent is described by a stochastic multiplicative process which,…
A continuous-time financial portfolio selection model with expected utility maximization typically boils down to solving a (static) convex stochastic optimization problem in terms of the terminal wealth, with a budget constraint. In…
Understanding the dependencies among financial assets is critical for portfolio optimization. Traditional approaches based on correlation networks often fail to capture the nonlinear and directional relationships that exist in financial…
This paper presents a widely applicable approach to solving (multi-marginal, martingale) optimal transport and related problems via neural networks. The core idea is to penalize the optimization problem in its dual formulation and reduce it…
This paper studies a type of periodic utility maximization for portfolio management in an incomplete market model, where the underlying price diffusion process depends on some external stochastic factors. The portfolio performance is…
Recently, optimal transport-based approaches have gained attention for deriving counterfactuals, e.g., to quantify algorithmic discrimination. However, in the general multivariate setting, these methods are often opaque and difficult to…
Consider a family of portfolio strategies with the aim of achieving the asymptotic growth rate of the best one. The idea behind Cover's universal portfolio is to build a wealth-weighted average which can be viewed as a buy-and-hold…
With the good development in the financial industry, the market starts to catch people's eyes, not only by the diversified investing choices ranging from bonds and stocks to futures and options but also by the general "high-risk,…
We introduce the proximal optimal transport divergence, a novel discrepancy measure that interpolates between information divergences and optimal transport distances via an infimal convolution formulation. This divergence provides a…
Growth-optimal portfolios are guaranteed to accumulate higher wealth than any other investment strategy in the long run. However, they tend to be risky in the short term. For serially uncorrelated markets, similar portfolios with more…
Optimal transport aims to estimate a transportation plan that minimizes a displacement cost. This is realized by optimizing the scalar product between the sought plan and the given cost, over the space of doubly stochastic matrices. When…
Divergences, also known as contrast functions, are distance-like quantities defined on manifolds of non-negative or probability measures. Using the duality in optimal transport, we introduce and study the one-parameter family of $L^{(\pm…
Investment returns naturally reside on irregular domains, however, standard multivariate portfolio optimization methods are agnostic to data structure. To this end, we investigate ways for domain knowledge to be conveniently incorporated…
We present a framework for modeling asset and portfolio dynamics, incorporating this information into portfolio optimization. For this framework, we introduce the Commonality Principle, providing a solution for the optimal selection of…
By the calculus of Peng's G-sublinear expectation and G-Brownian motion on a sublinear expectation space $(\Omega, {\cal H}, \hat{\mathbb{E}})$, we first set up an optimality principle of stochastic control problem. Then we investigate an…
We examine the problem of optimal portfolio allocation within the framework of utility theory. We apply exponential utility to derive the optimal diversification strategy and logarithmic utility to determine the optimal leverage. We enhance…
We present a method for constructing the log-optimal portfolio using the well-calibrated forecasts of market values. Dawid's notion of calibration and the Blackwell approachability theorem are used for computing well-calibrated forecasts.…
We consider inference (filtering) problems over probabilistic graphical models with aggregate data generated by a large population of individuals. We propose a new efficient belief propagation type algorithm over tree-structured graphs with…