Related papers: Portfolio diversification and model uncertainty: a…
Estimating time-varying correlation matrices is challenging because existing methods may adapt slowly to structural changes, impose insufficient regularization, or produce diffuse posterior uncertainty. In moderate dimensions, an additional…
The Total Portfolio Approach and Strategic Asset Allocation are widely viewed as competing frameworks for institutional portfolio management. We argue they differ in a single governance parameter: the tracking error constraint. Using U.S.…
In this study, we propose a new multi-objective portfolio optimization with idiosyncratic and systemic risks for financial networks. The two risks are measured by the idiosyncratic variance and the network clustering coefficient derived…
The main contribution of the paper is to employ the financial market network as a useful tool to improve the portfolio selection process, where nodes indicate securities and edges capture the dependence structure of the system. Three…
This paper addresses the importance of incorporating various risk measures in portfolio management and proposes a dynamic hybrid portfolio optimization model that combines the spectral risk measure and the Value-at-Risk in the mean-variance…
Diversification return is an incremental return earned by a rebalanced portfolio of assets. The diversification return of a rebalanced portfolio is often incorrectly ascribed to a reduction in variance. We argue that the underlying source…
Volatility is the canonical measure of financial risk, a role largely inherited from Modern Portfolio Theory. Yet, its universality rests on restrictive efficiency assumptions that render volatility, at best, an incomplete proxy for true…
This work is devoted to the development of a distributionally robust active fault diagnosis approach for a class of nonlinear systems, which takes into account any ambiguity in distribution information of the uncertain model parameters.…
The problem of portfolio optimization is one of the most important issues in asset management. This paper proposes a new dynamic portfolio strategy based on the time-varying structures of MST networks in Chinese stock markets, where the…
Portfolio selection problems that optimize expected utility are usually difficult to solve. If the number of assets in the portfolio is large, such expected utility maximization problems become even harder to solve numerically. Therefore,…
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…
Accurate volatility forecasts are vital in modern finance for risk management, portfolio allocation, and strategic decision-making. However, existing methods face key limitations. Fully multivariate models, while comprehensive, are…
We propose a data-driven portfolio selection model that integrates side information, conditional estimation and robustness using the framework of distributionally robust optimization. Conditioning on the observed side information, the…
This study delves into the intricate realm of risk evaluation within the domain of specific financial derivatives, notably options. Unlike other financial instruments, like bonds, options are susceptible to broader risks. A distinctive…
We develop a methodology for index tracking and risk exposure control using financial derivatives. Under a continuous-time diffusion framework for price evolution, we present a pathwise approach to construct dynamic portfolios of…
This paper presents how the most recent improvements made on covariance matrix estimation and model order selection can be applied to the portfolio optimisation problem. The particular case of the Maximum Variety Portfolio is treated but…
The evolution with time of the correlation structure of equity returns is studied by means of a filtered network approach investigating persistences and recurrences and their implications for risk diversification strategies. We build…
This paper presents a robust version of the stratified sampling method when multiple uncertain input models are considered for stochastic simulation. Various variance reduction techniques have demonstrated their superior performance in…
Optimal B-robust estimate is constructed for multidimensional parameter in drift coefficient of diffusion type process with small noise. Optimal mean-variance robust (optimal V -robust) trading strategy is find to hedge in mean-variance…
This paper studies an optimal investing problem for a retiree facing longevity risk and living standard risk. We formulate the investing problem as a portfolio choice problem under a time-varying risk capacity constraint. We derive the…