Related papers: Options on CPPI with guaranteed minimum equity exp…
In the market place, diversification reduces risk and provides protection against extreme events by ensuring that one is not overly exposed to individual occurrences. We argue that diversification is best measured by characteristics of the…
In portfolio optimization problems, the minimum expected investment risk is not always smaller than the expected minimal investment risk. That is, using a well-known approach from operations research, it is possible to derive a strategy…
We present a new approximation scheme for the price and exercise policy of American options. The scheme is based on Hermite polynomial expansions of the transition density of the underlying asset dynamics and the early exercise premium…
We study the continuous-time pre-commitment mean-variance portfolio selection in a time-varying financial market. By introducing two indexes which respectively express the average profitability of the risky asset (AP) and the current…
The Capital Asset Pricing Model (CAPM) relates a well-diversified stock portfolio to a benchmark portfolio. We insert size effect in CAPM, capturing the observation that small stocks have higher risk and return than large stocks, on…
In this paper, we develop an approach for optimizing the explicit binomial confidence interval recently derived by Chen et al. The optimization reduces conservativeness while guaranteeing prescribed coverage probability.
In this paper, we propose a general bi-objective model for portfolio selection, aiming to maximize both a diversification measure and the portfolio expected return. Within this general framework, we focus on maximizing a diversification…
We study the problem of super-replication for game options under proportional transaction costs. We consider a multidimensional continuous time model, in which the discounted stock price process satisfies the conditional full support…
We present an algorithm which efficiently estimates the intrinsic long-term value of a portfolio of assets on a quantum computer. The method relies on quantum amplitude estimation to estimate the mean of a novel implementation of the…
Modified policy iteration (MPI) is a dynamic programming algorithm that combines elements of policy iteration and value iteration. The convergence of MPI has been well studied in the context of discounted and average-cost MDPs. In this…
Kelly's Criterion is well known among gamblers and investors as a method for maximizing the returns one would expect to observe over long periods of betting or investing. These ideas are conspicuously absent from portfolio optimization…
We present an online approach to portfolio selection. The motivation is within the context of algorithmic trading, which demands fast and recursive updates of portfolio allocations, as new data arrives. In particular, we look at two online…
In an incomplete financial market, the axiomatic of Time Consistent Pricing Procedure (TCPP), recently introduced, is used to assign to any financial asset a dynamic limit order book, taking into account both the dynamics of basic assets…
Financial portfolios are often optimized for maximum profit while subject to a constraint formulated in terms of the Conditional Value-at-Risk (CVaR). This amounts to solving a linear problem. However, in its original formulation this…
Islamic equity screening relies on multiple binary rulebooks that often classify the same firm differently. This paper develops a Continuous Shariah Compliance Index (CSCI) on $[0,1]$ that embeds the published business-activity and…
For $n$ assets and discrete-time rebalancing, the probability to complete a given schedule of investments and withdrawals is maximized over progressively measurable portfolio weight functions. Applications consider two assets, namely the…
Option valuation problems are often solved using standard Monte Carlo (MC) methods. These techniques can often be enhanced using several strategies especially when one discretizes the dynamics of the underlying asset, of which we assume…
We study a static portfolio optimization problem with two risk measures: a principle risk measure in the objective function and a secondary risk measure whose value is controlled in the constraints. This problem is of interest when it is…
The portfolio optimization problem is a basic problem of financial analysis. In the study, an optimization model for constructing an options portfolio with a certain payoff function has been proposed. The model is formulated as an integer…
This paper presents a complementary approach to establish stability of finite receding horizon control with a terminal cost. First a new augmented stage cost is defined by rotating the terminal cost. Then a one-step optimisation problem is…