Related papers: Notes on Fano Ratio and Portfolio Optimization
In this paper, we study the global optimality of polynomial portfolio optimization (PPO). The PPO is a kind of portfolio selection model with high-order moments and flexible risk preference parameters. We introduce a perturbation sample…
In this research, starting from a widely accepted definition of risk, we support the idea that risk reduction is a more realistic objective than risk minimization, which represents a theoretical utopia. Furthermore, significant risk…
Designing dynamic portfolio insurance strategies under market conditions switching between two or more regimes is a challenging task in financial economics. Recently, a promising approach employing the value-at-risk (VaR) measure to assign…
Classical mean-variance portfolio theory tells us how to construct a portfolio of assets which has the greatest expected return for a given level of return volatility. Utility theory then allows an investor to choose the point along this…
The use of improved covariance matrix estimators as an alternative to the sample estimator is considered an important approach for enhancing portfolio optimization. Here we empirically compare the performance of 9 improved covariance…
Portfolio diversification is one of the most effective ways to minimize investment risk. Individuals and fund managers aim to create a portfolio of assets that not only have high returns but are also uncorrelated. This goal can be achieved…
Finding the hedge ratios for a portfolio and risk compression is the same mathematical problem. Traditionally, regression is used for this purpose. However, regression has its own limitations. For example, in a regression model, we can't…
Any optimization algorithm based on the risk parity approach requires the formulation of portfolio total risk in terms of marginal contributions. In this paper we use the independence of the underlying factors in the market to derive the…
We consider an investor, whose portfolio consists of a single risky asset and a risk free asset, who wants to maximize his expected utility of the portfolio subject to the Value at Risk assuming a heavy tail distribution of the stock prices…
We introduce new mathematical methods to study the optimal portfolio size of investment portfolios over time, considering investors with varying skill levels. First, we explore the benefit of portfolio diversification on an annual basis for…
Mean-reverting assets are one of the holy grails of financial markets: if such assets existed, they would provide trivially profitable investment strategies for any investor able to trade them, thanks to the knowledge that such assets…
Portfolio selection in the periodic investment of securities modeled by a multivariate Merton model with dependent jumps is considered. The optimization framework is designed to maximize expected terminal wealth when portfolio risk is…
In the portfolio multiobjective optimization framework, we propose to compare and choose, among all feasible asset portfolios of a given market, the one that maximizes the product of the distances between its values of risk and gain and…
We attempt to mitigate the persistent tradeoff between risk and return in medium- to long-term portfolio management. This paper proposes a novel LLM-guided no-regret portfolio allocation framework that integrates online learning dynamics,…
We introduce a universal framework for mean-covariance robust risk measurement and portfolio optimization. We model uncertainty in terms of the Gelbrich distance on the mean-covariance space, along with prior structural information about…
In this paper, we search for optimal portfolio strategies in the presence of various risk measure that are common in financial applications. Particularly, we deal with the static optimization problem with respect to Value at Risk, Expected…
Stochastic portfolio theory aims at finding relative arbitrages, i.e. trading strategies which outperform the market with probability one. Functionally generated portfolios, which are deterministic functions of the market weights, are an…
We consider the problem of simulating loss probabilities and conditional excesses for linear asset portfolios under the t-copula model. Although in the literature on market risk management there are papers proposing efficient variance…
This paper investigates the large sample properties of the variance, weights, and risk of high-dimensional portfolios where the inverse of the covariance matrix of excess asset returns is estimated using a technique called nodewise…
We introduce diversified risk parity embedded with various reward-risk measures and more generic allocation rules for portfolio construction. We empirically test the proposed reward-risk parity strategies and compare their performance with…