Related papers: A short note on "Anticipative portfolio optimizati…
A continuous-time Markowitz's mean-variance portfolio selection problem is studied in a market with one stock, one bond, and proportional transaction costs. This is a singular stochastic control problem,inherently in a finite time horizon.…
It is shown that the axioms for coherent risk measures imply that whenever there is an asset in a portfolio that dominates the others in a given sample (which happens with finite probability even for large samples), then this portfolio…
Volume imbalance in a limit order book is often considered as a reliable indicator for predicting future price moves. In this work, we seek to analyse the nuances of the relationship between prices and volume imbalance. To this end, we…
We propose a novel portfolio selection approach that manages to ease some of the problems that characterise standard expected utility maximisation. The optimal portfolio is no longer defined as the extremum of a suitably chosen utility…
We consider classical Merton problem of terminal wealth maximization in finite horizon. We assume that the drift of the stock is following Ornstein-Uhlenbeck process and the volatility of it is following GARCH(1) process. In particular,…
This paper diverges from previous literature by considering the utility maximization problem in the context of investors having the freedom to actively acquire additional information to mitigate estimation risk. We derive closed-form value…
The usual theory of asset pricing in finance assumes that the financial strategies, i.e. the quantity of risky assets to invest, are real-valued so that they are not integer-valued in general, see the Black and Scholes model for instance.…
This paper investigates optimal portfolio strategies in a market where the drift is driven by an unobserved Markov chain. Information on the state of this chain is obtained from stock prices and expert opinions in the form of signals at…
This work introduces a novel blackbox optimization algorithm for computationally expensive constrained multi-fidelity problems. When applying a direct search method to such problems, the scarcity of feasible points may lead to numerous…
In this article we consider an optimization problem of expected utility maximization of continuous-time trading in a financial market. This trading is constrained by a benchmark for a utility-based shortfall risk measure. The market…
Long term investment is one of the major investment strategies. However, calculating intrinsic value of some company and evaluating shares for long term investment is not easy, since analyst have to care about a large number of financial…
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…
Before the massive spread of computer technology, information was far from complex. The development of technology shifted the paradigm: from individuals who faced scarce and costly information to individuals who face massive amounts of…
Mid-cap companies, generally valued between \$2 billion and \$10 billion, provide investors with a well-rounded opportunity between the fluctuation of small-cap stocks and the stability of large-cap stocks. This research builds upon the…
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…
The risk premium is one of main concepts in mathematical finance. It is a measure of the trade-offs investors make between return and risk and is defined by the excess return relative to the risk-free interest rate that is earned from an…
We investigate the growth optimal strategy over a finite time horizon for a stock and bond portfolio in an analytically solvable multiplicative Markovian market model. We show that the optimal strategy consists in holding the amount of…
Strategic information is valuable either by remaining private (for instance if it is sensitive) or, on the other hand, by being used publicly to increase some utility. These two objectives are antagonistic and leaking this information might…
We present a robust version of the life-cycle optimal portfolio choice problem in the presence of labor income, as introduced in Biffis, Gozzi and Prosdocimi ("Optimal portfolio choice with path dependent labor income: the infinite horizon…
Prediction markets are often described as mechanisms that ``aggregate information'' into prices, yet the mapping from dispersed private information to observed market histories is typically noisy, endogenous, and shaped by heterogeneous and…