Related papers: Optimal Portfolio Design for Statistical Arbitrage…
We study optimal investment in a financial market having a finite number of assets from a signal processing perspective. We investigate how an investor should distribute capital over these assets and when he should reallocate the…
We propose a two-level, learning-based portfolio method (RL-BHRP) that spreads risk across sectors and stocks, and adjusts exposures as market conditions change. Using U.S. Equities from 2012 to mid-2025, we design the model using 2012 to…
We study optimal investment strategies that maximize expected utility from consumption and terminal wealth in a pure-jump asset price model with Markov-modulated (regime switching) jump-size distributions. We give sufficient conditions for…
We consider the problem of choosing a portfolio that maximizes the cumulative prospect theory (CPT) utility on an empirical distribution of asset returns. We show that while CPT utility is not a concave function of the portfolio weights, it…
Stochastic domains often involve risk-averse decision makers. While recent work has focused on how to model risk in Markov decision processes using risk measures, it has not addressed the problem of solving large risk-averse formulations.…
In this work, we study a dynamic portfolio optimization problem related to pairs trading, which is an investment strategy that matches a long position in one security with a short position in another security with similar characteristics.…
We propose a data-driven Neural Network (NN) optimization framework to determine the optimal multi-period dynamic asset allocation strategy for outperforming a general stochastic target. We formulate the problem as an optimal stochastic…
In financial investing, universal portfolios are a means of constructing portfolios which guarantee a certain level of performance relative to a baseline, while making no statistical assumptions about the future market data. They fall under…
We study the profitability of optimal mean reversion trading strategies in the US equity market. Different from regular pair trading practice, we apply maximum likelihood method to construct the optimal static pairs trading portfolio that…
This paper is concerned with portfolio optimization models for creating high-quality lists of recommended items to balance the accuracy and diversity of recommendations. However, the statistics (i.e., expectation and covariance of ratings)…
This paper studies a continuous-time portfolio selection problem under a general distribution of random risk aversion (RRA). We provide a complete characterization of all deterministic equilibrium strategies in closed form. Our results show…
Sharpe ratio (also known as reward-to-variability ratio) is a widely-used metric in finance, which measures the additional return at the cost of per unit of increased risk (standard deviation of return). However, the optimization of Sharpe…
In this article we consider a special case of an optimal consumption/optimal portfolio problem first studied by Constantinides and Magill and by Davis and Norman, in which an agent with constant relative risk aversion seeks to maximise…
Markov decision processes (MDPs) are widely used in modeling decision making problems in stochastic environments. However, precise specification of the reward functions in MDPs is often very difficult. Recent approaches have focused on…
Risk control and optimal diversification constitute a major focus in the finance and insurance industries as well as, more or less consciously, in our everyday life. We present a discussion of the characterization of risks and of the…
In large-scale games, approximating the opponent's strategy space with a small portfolio of representative strategies is a common and powerful technique. However, the construction of these portfolios often relies on domain-specific…
In this paper, new results in random matrix theory are derived which allow us to construct a shrinkage estimator of the global minimum variance (GMV) portfolio when the shrinkage target is a random object. More specifically, the shrinkage…
In this paper, we study the portfolio optimization problem formulated by Lacker and Soret. They formulate a finite time horizon model that allows agents to be competitive, measuring their utility not only by their absolute wealth but also…
This paper is concerned with a pairs trading rule. The idea is to monitor two historically correlated securities. When divergence is underway, i.e., one stock moves up while the other moves down, a pairs trade is entered which consists of a…
This paper investigates performance attribution measures as a basis for constraining portfolio optimization. We employ optimizations that minimize expected tail loss and investigate both asset allocation (AA) and the selection effect (SE)…