Related papers: Portfolio Optimization and Model Predictive Contro…
This paper presents a framework of imitating the principal investor's behavior for optimal pricing and hedging options. We construct a non-deterministic Markov decision process for modeling stock price change driven by the principal…
Control of drawdown, that is, the control of the drops in wealth over time from peaks to subsequent lows, is of great concern from a risk management perspective. With this motivation in mind, the focal point of this paper is to address the…
Agent-based models help explain stock price dynamics as emergent phenomena driven by interacting investors. In this modeling tradition, investor behavior has typically been captured by two distinct mechanisms -- learning and heterogeneous…
Classical portfolio models degrade under structural breaks, whereas flexible machine-learning allocation methods often lack arbitrage consistency and interpretability. We propose Causal PDE-Control Models (CPCMs), a framework that…
We employ model predictive control for a multi-period portfolio optimization problem. In addition to the mean-variance objective, we construct a portfolio whose allocation is given by model predictive control with a risk-parity objective,…
We introduce a system of kinetic equations describing an exchange market consisting of two populations of agents (dealers and speculators) expressing the same preferences for two goods, but applying different strategies in their exchanges.…
We present a simulation-and-regression method for solving dynamic portfolio allocation problems in the presence of general transaction costs, liquidity costs and market impacts. This method extends the classical least squares Monte Carlo…
In a continuous time stochastic economy, this paper considers the problem of consumption and investment in a financial market in which the representative investor exhibits a change in the discount rate. The investment opportunities are a…
We study here numerically the behavior of an ideal gas like model of markets having only one non-consumable commodity. We investigate the behavior of the steady-state distributions of money, commodity and total wealth, as the dynamics of…
In this paper we present a framework for risk-averse model predictive control (MPC) of linear systems affected by multiplicative uncertainty. Our key innovation is to consider time-consistent, dynamic risk metrics as objective functions to…
In this paper the optimal control of alignment models composed by a large number of agents is investigated in presence of a selective action of a controller, acting in order to enhance consensus. Two types of selective controls have been…
We study the dynamic investment decisions of investors who prioritise specific quantiles of outcomes over their expected values. Downside-focused agents targeting low quantiles reduce risk in states with high variance, while those with a…
Strategy evaluation schemes are a crucial factor in any agent-based market model, as they determine the agents' strategy preferences and consequently their behavioral pattern. This study investigates how the strategy evaluation schemes…
In this research, we have empirically investigated the key drivers affecting liquidity in equity markets. We illustrated how theoretical models, such as Kyle's model, of agents' interplay in the financial markets, are aligned with the…
Agent-based modeling is a powerful simulation technique to understand the collective behavior and microscopic interaction in complex financial systems. Recently, the concept for determining the key parameters of the agent-based models from…
Scale invariance, collective behaviours and structural reorganization are crucial for portfolio management (portfolio composition, hedging, alternative definition of risk, etc.). This lack of any characteristic scale and such elaborated…
When we implement a portfolio selection methodology under a mean-risk formulation, it is essential to correctly model investors' risk aversion which may be time-dependent, or even state-dependent during the investment procedure. In this…
The lattice gas automaton (LGA) is proposed for a closed economic market of agents with heterogeneous saving interests. There are two procedures in the standard LGA, i.e., "propagation" + "transaction". If the propagation step is removed…
In this work we study the individual strategies carried out by agents undergoing transactions in wealth exchange models. We analyze the role of risk propensity in the behavior of the agents and find a critical risk, such that agents with…
Modelling all possible life cycles of a company in a highly competitive economic environment gives a significant advantage to the owner in his business investment activities. This article proposes and analyses a dynamic model of a company's…