Related papers: Time consistency of the mean-risk problem
Robust estimation for modern portfolio selection on a large set of assets becomes more important due to large deviation of empirical inference on big data. We propose a distributionally robust methodology for high-dimensional mean-variance…
We consider the optimization of active extension portfolios. For this purpose, the optimization problem is rewritten as a stochastic programming model and solved using a clever multi-start local search heuristic, which turns out to provide…
In this paper, we develop a time-series-based signed network model for dimensionality reduction in portfolio optimization, grounded in Markowitz's portfolio theory and extended to incorporate higher-order moments of asset return…
Optimal capital allocation between different assets is an important financial problem, which is generally framed as the portfolio optimization problem. General models include the single-period and multi-period cases. The traditional…
Markov decision problems are most commonly solved via dynamic programming. Another approach is Bellman residual minimization, which directly minimizes the squared Bellman residual objective function. However, compared to dynamic…
We study mean-risk optimal portfolio problems where risk is measured by Recovery Average Value at Risk, a prominent example in the class of recovery risk measures. We establish existence results in the situation where the joint distribution…
In his famous paper, Markowitz (1952) derived the dependence of portfolio random returns on the random returns of its securities. This result allowed Markowitz to obtain his famous expression for portfolio variance. We show that Markowitz's…
This paper studies a variation of the continuous-time mean-variance portfolio selection where a tracking-error penalization is added to the mean-variance criterion. The tracking error term penalizes the distance between the allocation…
We propose to solve large scale Markowitz mean-variance (MV) portfolio allocation problem using reinforcement learning (RL). By adopting the recently developed continuous-time exploratory control framework, we formulate the exploratory MV…
In the present paper, we derive a closed-form solution of the multi-period portfolio choice problem for a quadratic utility function with and without a riskless asset. All results are derived under weak conditions on the asset returns. No…
Focusing on gains & losses relative to a risk-free benchmark instead of terminal wealth, we consider an asset allocation problem to maximize time-consistently a mean-risk reward function with a general risk measure which is i)…
Entropy based ideas find wide-ranging applications in finance for calibrating models of portfolio risk as well as options pricing. The abstracted problem, extensively studied in the literature, corresponds to finding a probability measure…
We study a continuous-time portfolio optimization problem under an explicit constraint on the Deviation Conditional Value-at-Risk (DCVaR), defined as the difference between the CVaR and the expected terminal wealth. While the mean-CVaR…
This paper considers a robust time-consistent mean-variance-skewness portfolio selection problem for an ambiguity-averse investor by taking into account wealth-dependent risk aversion and wealth-dependent skewness preference as well as…
We consider the problem of selecting a portfolio of assets that provides the investor a suitable balance of expected return and risk. With respect to the seminal mean-variance model of Markowitz, we consider additional constraints on the…
The classical dynamic programming-based optimal stochastic control methods fail to cope with nonseparable dynamic optimization problems as the principle of optimality no longer applies in such situations. Among these notorious nonseparable…
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 this paper, the mean-variance portfolio selection problem with Poisson jumps are studied, where the recursive utility is given by the solution to a backward stochastic differential equation with Poisson jumps. Both the maximum principle…
We consider continuous-time stochastic optimal control problems featuring Conditional Value-at-Risk (CVaR) in the objective. The major difficulty in these problems arises from time-inconsistency, which prevents us from directly using…
We study a discrete-time multi-period portfolio optimization problem under an explicit constraint on the Deviation Conditional Value-at-Risk (DCVaR), defined as the excess of Conditional Value-at-Risk over expected terminal wealth. The…