Related papers: Large-Scale Portfolio Allocation Under Transaction…
This paper studies a variation of the continuous-time mean-variance portfolio selection where a tracking-error penalization is added to the mean-variance criterion. The tracking error term penalizes the distance between the allocation…
We model the impact costs of a strategy that trades a basket of correlated instruments, by extending to the multivariate case the linear propagator model previously used for single instruments. Our specification allows us to calibrate a…
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…
The present article explores the application of randomized control techniques in empirical asset pricing and performance evaluation. It introduces geometric random walks, a class of Markov chain Monte Carlo methods, to construct flexible…
We use an adversarial expert based online learning algorithm to learn the optimal parameters required to maximise wealth trading zero-cost portfolio strategies. The learning algorithm is used to determine the relative population dynamics of…
The problem of portfolio allocation in the context of stocks evolving in random environments, that is with volatility and returns depending on random factors, has attracted a lot of attention. The problem of maximizing a power utility at a…
This paper presents how the most recent improvements made on covariance matrix estimation and model order selection can be applied to the portfolio optimisation problem. The particular case of the Maximum Variety Portfolio is treated but…
We consider a dynamic portfolio optimization problem that incorporates predictable returns, instantaneous transaction costs, price impact, and stochastic volatility, extending the classical results of Garleanu and Pedersen (2013), which…
Financial portfolio optimization is a widely studied problem in mathematics, statistics, financial and computational literature. It adheres to determining an optimal combination of weights associated with financial assets held in a…
Optimal trading strategies for pairs trading have been studied by models that try to find either optimal shares of stocks by assuming no transaction costs or optimal timing of trading fixed numbers of shares of stocks with transaction…
This paper studies the optimal consumption under the addictive habit formation preference in markets with transaction costs and unbounded random endowments. To model the proportional transaction costs, we adopt the Kabanov's multi-asset…
Recent progress in portfolio choice has made a wide class of problems involving transaction costs tractable. We review the basic approach to these problems, and outline some directions for future research.
The field of portfolio selection is an active research topic, which combines elements and methodologies from various fields, such as optimization, decision analysis, risk management, data science, forecasting, etc. The modeling and…
In a fixed time horizon, appropriately executing a large amount of a particular asset -- meaning a considerable portion of the volume traded within this frame -- is challenging. Especially for illiquid or even highly liquid but also highly…
We study portfolio selection in a model with both temporary and transient price impact introduced by Garleanu and Pedersen (2016). In the large-liquidity limit where both frictions are small, we derive explicit formulas for the…
We build the time series of optimal realized portfolio weights from high-frequency data and we suggest a novel Dynamic Conditional Weights (DCW) model for their dynamics. DCW is benchmarked against popular model-based and model-free…
In this paper, we discuss the ambiguous chance constrained based portfolio optimization problems, in which the perturbations associated with the input parameters are stochastic in nature, but their distributions are not known precisely. We…
In this short note, we will show how to optimize the portfolio of a large trader whose hedging strategy affects the price of his assets.
We investigate whether sophisticated volatility estimation improves the out-of-sample performance of mean-variance portfolio strategies relative to the naive 1/N strategy. The portfolio strategies rely solely upon second moments. Using a…
This paper studies a finite-horizon portfolio selection problem with non-concave terminal utility and proportional transaction costs, in which the commonly used concavification principle for terminal value is no longer applicable. We…