Related papers: On Drawdown-Modulated Feedback Control in Stock Tr…
This paper extends the existing drawdown modulation control policy to include a novel restart mechanism for trading. It is known that the drawdown modulation policy guarantees the maximum percentage drawdown no larger than a prespecified…
The focal point of this paper is the issue of "drawdown" which arises in recursive betting scenarios and related applications in the stock market. Roughly speaking, drawdown is understood to mean drops in wealth over time from peaks to…
In this paper, we work in the framework of the Merton problem but we impose a drawdown constraint on the consumption process. This means that consumption can never fall below a fixed proportion of the running maximum of past consumption. In…
Maximum drawdown, the largest cumulative loss from peak to trough, is one of the most widely used indicators of risk in the fund management industry, but one of the least developed in the context of measures of risk. We formalize drawdown…
We consider a diffusion risk model where dividends are paid at rate $U(t) \in [0, u_0]$. We are interested in maximising the dividend payments under a drawdown constraint, that is, we penalise a drawdown size larger than a level $d > 0$. We…
This paper introduces a novel methodology for the pricing and management of share buyback contracts, overcoming the limitations of traditional optimal control methods, which frequently encounter difficulties with high-dimensional state…
In this work, we consider the optimal portfolio selection problem under hard constraints on trading volume amounts when the dynamics of the risky asset returns are governed by a discrete-time approximation of the Markov-modulated geometric…
We consider risk averse investors with different levels of anxiety about asset price drawdowns. The latter is defined as the distance of the current price away from its best performance since inception. These drawdowns can increase either…
A novel method for control of dynamical systems, proposed in the paper, ensures an output signal belonging to the given set at any time. The method is based on a special change of coordinates such that the initial problem with given…
We use a deep neural network to generate controllers for optimal trading on high frequency data. For the first time, a neural network learns the mapping between the preferences of the trader, i.e. risk aversion parameters, and the optimal…
This paper studies an optimal dividend problem with a drawdown constraint in a Brownian motion model, requiring the dividend payout rate to remain above a fixed proportion of its historical maximum. This leads to a path-dependent stochastic…
This paper studies the bail-out optimal dividend problem with regime switching under the constraint that the cumulative dividend strategy is absolutely continuous. We confirm the optimality of the regime-modulated refraction-reflection…
A new formulation of Stochastic Model Predictive Output Feedback Control is presented and analyzed as a translation of Stochastic Optimal Output Feedback Control into a receding horizon setting. This requires lifting the design into a…
We consider the classic Kelly gambling problem with general distribution of outcomes, and an additional risk constraint that limits the probability of a drawdown of wealth to a given undesirable level. We develop a bound on the drawdown…
Statistics of drawdowns (loss from the last local maximum to the next local minimum) plays an important role in risk assessment of investment strategies. As they incorporate higher ($>$ two) order correlations, they offer a better measure…
We consider a diffusion risk model where proportional reinsurance can be bought. In order to stabilise the surplus process, one tries to keep the drawdown, that is the difference of the surplus to its historical maximum, in an interval…
In this paper, we consider a simple discrete-time optimal betting problem using the celebrated Kelly criterion, which calls for maximization of the expected logarithmic growth of wealth. While the classical Kelly betting problem can be…
A drawdown constraint forces the current wealth to remain above a given function of its maximum to date. We consider the portfolio optimisation problem of maximising the long-term growth rate of the expected utility of wealth subject to a…
Stop-loss rules are often studied in the financial literature, but the stop-loss levels are seldom constructed systematically. In many papers, and indeed in practice as well, the level of the stops is too often set arbitrarily. Guided by…
We consider the problem of dynamic buying and selling of shares from a collection of $N$ stocks with random price fluctuations. To limit investment risk, we place an upper bound on the total number of shares kept at any time. Assuming that…