Related papers: Notes on Fano Ratio and Portfolio Optimization
In this paper we consider the problem of minimising drawdown in a portfolio of financial assets. Here drawdown represents the relative opportunity cost of the single best missed trading opportunity over a specified time period. We formulate…
We provided proof here that coefficient of variation (CV) is a direct measure of risk using an equation that has been derived here for the first time. We also presented a method to generate a stock CV based on return that strongly…
It is well known that quantile regression model minimizes the portfolio extreme risk, whenever the attention is placed on the estimation of the response variable left quantiles. We show that, by considering the entire conditional…
This paper considers the mean-reverting portfolio design problem arising from statistical arbitrage in the financial markets. We first propose a general problem formulation aimed at finding a portfolio of underlying component assets by…
We consider the problem of finding the efficient frontier associated with the risk-return portfolio optimization model. We derive the analytical expression of the efficient frontier for a portfolio of N risky assets, and for the case when a…
In this paper, we present an integrated approach to portfolio construction and optimization, leveraging high-performance computing capabilities. We first explore diverse pairings of generative model forecasts and objective functions used…
Modern portfolio theory(MPT) addresses the problem of determining the optimum allocation of investment resources among a set of candidate assets. In the original mean-variance approach of Markowitz, volatility is taken as a proxy for risk,…
In statistical inference problems, we wish to obtain lower bounds on the minimax risk, that is to bound the performance of any possible estimator. A standard technique to obtain risk lower bounds involves the use of Fano's inequality. In an…
Designing an optimum portfolio that allocates weights to its constituent stocks in a way that achieves the best trade-off between the return and the risk is a challenging research problem. The classical mean-variance theory of portfolio…
Given multivariate time series, we study the problem of forming portfolios with maximum mean reversion while constraining the number of assets in these portfolios. We show that it can be formulated as a sparse canonical correlation analysis…
We consider continuous-time mean-variance portfolio selection with bankruptcy prohibition under convex cone portfolio constraints. This is a long-standing and difficult problem not only because of its theoretical significance, but also for…
We address the problem of portfolio optimization under the simplest coherent risk measure, i.e. the expected shortfall. As it is well known, one can map this problem into a linear programming setting. For some values of the external…
A quantum-inspired optimization approach is proposed to study the portfolio optimization aimed at selecting an optimal mix of assets based on the risk-return trade-off to achieve the desired goal in investment. By integrating conventional…
Many cryptocurrency brokers nowadays offer a variety of derivative assets that allow traders to perform hedging or speculation. This paper proposes an effective algorithm based on neural networks to take advantage of these investment…
Analytical, free of time consuming Monte Carlo simulations, framework for credit portfolio systematic risk metrics calculations is presented. Techniques are described that allow calculation of portfolio-level systematic risk measures…
This paper uses simulation-based portfolio optimization to mitigate the left tail risk of the portfolio. The contribution is twofold. (i) We propose the Markov regime-switching GARCH model with multivariate normal tempered stable innovation…
We find economically and statistically significant gains when using machine learning for portfolio allocation between the market index and risk-free asset. Optimal portfolio rules for time-varying expected returns and volatility are…
Using daily returns of the S&P 500 stocks from 2001 to 2011, we perform a backtesting study of the portfolio optimization strategy based on the extreme risk index (ERI). This method uses multivariate extreme value theory to minimize the…
Since Markowitz's mean-variance framework, optimizing a portfolio that maximizes the profit and minimizes the risk has been ubiquitous in the financial industry. Initially, profit and risk were measured by the first two moments of the…
This work proposes a novel portfolio management technique, the Meta Portfolio Method (MPM), inspired by the successes of meta approaches in the field of bioinformatics and elsewhere. The MPM uses XGBoost to learn how to switch between two…