Related papers: On the solution uniqueness in portfolio optimizati…
This paper studies a type of periodic utility maximization problems for portfolio management in incomplete stochastic factor models with convex trading constraints. The portfolio performance is periodically evaluated on the relative ratio…
In incomplete financial markets not every contingent claim can be replicated by a self-financing strategy. The risk of the resulting shortfall can be measured by convex risk measures, recently introduced by F\"ollmer, Schied (2002). The…
This paper addresses risk averse constrained optimization problems where the objective and constraint functions can only be computed by a blackbox subject to unknown uncertainties. To handle mixed aleatory/epistemic uncertainties, the…
Mean-variance analysis is widely used in portfolio management to identify the best portfolio that makes an optimal trade-off between expected return and volatility. Yet, this method has its limitations, notably its vulnerability to…
We address the problem of portfolio optimization under the simplest coherent risk measure, i.e. the expected shortfall. As it is well known, one can map this problem into a linear programming setting. For some values of the external…
We consider the terminal wealth utility maximization problem from the point of view of a portfolio manager who is paid by an incentive scheme, which is given as a convex function $g$ of the terminal wealth. The manager's own utility…
In the existing financial literature, entropy based ideas have been proposed in portfolio optimization, in model calibration for options pricing as well as in ascertaining a pricing measure in incomplete markets. The abstracted problem…
Finding Bertram's optimal trading strategy for a pair of cointegrated assets following the Ornstein--Uhlenbeck price difference process can be formulated as an unconstrained convex optimization problem for maximization of expected profit…
This paper is devoted to study the optimal portfolio problem. Harry Markowitz's Ph.D. thesis prepared the ground for the mathematical theory of finance. In modern portfolio theory, we typically find asset returns that are modeled by a…
We consider an investor facing a classical portfolio problem of optimal investment in a log-Brownian stock and a fixed-interest bond, but constrained to choose portfolio and consumption strategies that reduce a dynamic shortfall risk…
The sparse portfolio selection problem is one of the most famous and frequently-studied problems in the optimization and financial economics literatures. In a universe of risky assets, the goal is to construct a portfolio with maximal…
We consider the problem of portfolio selection within the classical Markowitz mean-variance framework, reformulated as a constrained least-squares regression problem. We propose to add to the objective function a penalty proportional to the…
In the paper, we consider three quadratic optimization problems which are frequently applied in portfolio theory, i.e, the Markowitz mean-variance problem as well as the problems based on the mean-variance utility function and the quadratic…
According to recent findings [1,2], empirical covariance matrices deduced from financial return series contain such a high amount of noise that, apart from a few large eigenvalues and the corresponding eigenvectors, their structure can…
The portfolio optimization problem in which the variances of the return rates of assets are not identical is analyzed in this paper using the methodology of statistical mechanical informatics, specifically, replica analysis. We define two…
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 present an exact algorithm for mean-risk optimization subject to a budget constraint, where decision variables may be continuous or integer. The risk is measured by the covariance matrix and weighted by an arbitrary monotone function,…
We consider the hedging error of a derivative due to discrete trading in the presence of a drift in the dynamics of the underlying asset. We suppose that the trader wishes to find rebalancing times for the hedging portfolio which enable him…
This paper explores the practical approach to portfolio selection methods for investments. The study delves into portfolio theory, discussing concepts such as expected return, variance, asset correlation, and opportunity sets. It also…
In high-stakes engineering applications, optimization algorithms must come with provable worst-case guarantees over a mathematically defined class of problems. Designing for the worst case, however, inevitably sacrifices performance on the…