Related papers: Portfolio Construction Matters
Portfolio management problems are often divided into two types: active and passive, where the objective is to outperform and track a preselected benchmark, respectively. Here, we formulate and solve a dynamic asset allocation problem that…
Searching for new effective risk factors on stock returns is an important research topic in asset pricing. Factor modeling is an active research topic in statistics and econometrics, with many new advances. However, these new methods have…
The aim of this work consists in the study of the optimal investment strategy for a behavioural investor, whose preference towards risk is described by both a probability distortion and an S-shaped utility function. Within a continuous-time…
This thesis investigates Merton's portfolio problem under two different rough Heston models, which have a non-Markovian structure. The motivation behind this choice of problem is due to the recent discovery and success of rough volatility…
Once there is a decision of rebalancing or updating a portfolio of funds, the process of changing the current portfolio to the target one, involves a set of transactions that are susceptible of being optimized. This is particularly relevant…
This paper investigates a time-inconsistent portfolio selection problem in the incomplete mar ket model, integrating expected utility maximization with risk control. The objective functional balances the expected utility and variance on log…
This article explores dynamic factor allocation by analyzing the cyclical performance of factors through regime analysis. The authors focus on a U.S. equity investment universe comprising seven long-only indices representing the market and…
The risk premia of traded factors are the sum of factor means and a parameter vector we denote by {\phi} which is identified from the cross section regression of alpha of individual securities on the vector of factor loadings. If phi is…
We deal with the optimal execution problem when the broker's goal is to reach a performance barrier avoiding a downside barrier. The performance is provided by the wealth accumulated by trading in the market, the shares detained by the…
Much research in systemic risk is focused on default contagion. While this demands an understanding of valuation, fewer articles specifically deal with the existence, the uniqueness, and the computation of equilibrium prices in structural…
The problem of portfolio optimization when stochastic factors drive returns and volatilities has been studied in previous works by the authors. In particular, they proposed asymptotic approximations for value functions and optimal…
In an incomplete market, including liquidly-traded European options in an investment portfolio could potentially improve the expected terminal utility for a risk-averse investor. However, unlike the Sharpe ratio, which provides a concise…
In this paper, we present an integrated approach to portfolio construction and optimization, leveraging high-performance computing capabilities. We first explore diverse pairings of generative model forecasts and objective functions used…
In recent years, multi-factor strategies have gained increasing popularity in the financial industry, as they allow investors to have a better understanding of the risk drivers underlying their portfolios. Moreover, such strategies promise…
We apply numerical dynamic programming techniques to solve discrete-time multi-asset dynamic portfolio optimization problems with proportional transaction costs and shorting/borrowing constraints. Examples include problems with multiple…
In this paper, we develop the theory of functional generation of portfolios in an equity market with changing dimension. By introducing dimensional jumps in the market, as well as jumps in stock capitalization between the dimensional jumps,…
We analyze the stability of financial investment networks, where financial institutions hold overlapping portfolios of assets. We consider the effect of portfolio diversification and heterogeneous investments using a random matrix dynamical…
We study the finite horizon Merton portfolio optimization problem in a general local-stochastic volatility setting. Using model coefficient expansion techniques, we derive approximations for the both the value function and the optimal…
We give an explicit formulaic algorithm and source code for building long-only benchmark portfolios and then using these benchmarks in long-only market outperformance strategies. The benchmarks (or the corresponding betas) do not involve…
In this paper, we consider the problem of optimization of a portfolio consisting of securities. An investor with an initial capital, is interested in constructing a portfolio of securities. If the prices of securities change, the investor…