Related papers: Complex Valued Risk Diversification
We review the recently introduced concept of variety of a financial portfolio and we sketch its importance for risk control purposes. The empirical behaviour of variety, correlation, exceedance correlation and asymmetry of the probability…
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…
The quantification of diversification benefits due to risk aggregation plays a prominent role in the (regulatory) capital management of large firms within the financial industry. However, the complexity of today's risk landscape makes a…
High precision analytical approximation is proposed for variance-covariance based risk allocation in a portfolio of risky assets. A general case of a single-period multi-factor Merton-type model with stochastic recovery is considered. The…
We consider the problem of risk diversification in complex networks. Nodes represent e.g. financial actors, whereas weighted links represent e.g. financial obligations (credits/debts). Each node has a risk to fail because of losses…
Portfolio optimization methods have evolved significantly since Markowitz introduced the mean-variance framework in 1952. While the theoretical appeal of this approach is undeniable, its practical implementation poses important challenges,…
We present an approach to the dynamic valuation of exposure risks in the multi-period setting, which incorporates a dynamic and multiple diversification of risks in Pareto optimal sense. This approach extends classical indifference premium…
This paper focuses on the developing of high-dimensional risk models to construct portfolios of securities in the US stock exchange. Investors seek to gain the highest profits and lowest risk in capital markets. We have developed various…
We establish the first axiomatic theory for diversification indices using six intuitive axioms: non-negativity, location invariance, scale invariance, rationality, normalization, and continuity. The unique class of indices satisfying these…
Excessive leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be…
Portfolio diversification and active risk management are essential parts of financial analysis which became even more crucial (and questioned) during and after the years of the Global Financial Crisis. We propose a novel approach to…
In this paper, we provide a comprehensive review of recent advances in robust portfolio selection problems and their extensions, from both operational research and financial perspectives. A multi-dimensional classification of the models and…
This article develops the theory of risk budgeting portfolios, when we would like to impose weight constraints. It appears that the mathematical problem is more complex than the traditional risk budgeting problem. The formulation of the…
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)…
For the past two decades investors have observed long memory and highly correlated behavior of asset classes that does not fit into the framework of Modern Portfolio Theory. Custom correlation and standard deviation estimators consider…
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…
Modeling and managing portfolio risk is perhaps the most important step to achieve growing and preserving investment performance. Within the modern portfolio construction framework that built on Markowitz's theory, the covariance matrix of…
We consider an investor, whose portfolio consists of a single risky asset and a risk free asset, who wants to maximize his expected utility of the portfolio subject to the Value at Risk assuming a heavy tail distribution of the stock prices…
We consider the problem of accurately measuring the credit risk of a portfolio consisting of loss exposures such as loans, bonds and other financial assets. We are particularly interested in the probability of large portfolio losses. We…
This paper focuses on a dynamic multi-asset mean-variance portfolio selection problem under model uncertainty. We develop a continuous time framework for taking into account ambiguity aversion about both expected return rates and…