Related papers: Exact Solution for the Portfolio Diversification P…
We design an optimal strategy for investment in a portfolio of assets subject to a multiplicative Brownian motion. The strategy provides the maximal typical long-term growth rate of investor's capital. We determine the optimal fraction of…
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…
Risk diversification is one of the dominant concerns for portfolio managers. Various portfolio constructions have been proposed to minimize the risk of the portfolio under some constrains including expected returns. We propose a portfolio…
In this work, we consider weighted signed network representations of financial markets derived from raw or denoised correlation matrices, and examine how negative edges can be exploited to reduce portfolio risk. We then propose a discrete…
This paper studies the mean-variance optimal portfolio choice of an investor pre-committed to a deterministic investment policy in continuous time in a market with mean-reversion in the risk-free rate and the equity risk-premium. In the…
In his famous paper, Markowitz (1952) derived the dependence of portfolio random returns on the random returns of its securities. This result allowed Markowitz to obtain his famous expression for portfolio variance. We show that Markowitz's…
This paper presents several models addressing optimal portfolio choice, optimal portfolio liquidation, and optimal portfolio transition issues, in which the expected returns of risky assets are unknown. Our approach is based on a coupling…
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…
Utility and risk are two often competing measurements on the investment success. We show that efficient trade-off between these two measurements for investment portfolios happens, in general, on a convex curve in the two dimensional space…
In finance industry portfolio construction deals with how to divide the investors' wealth across an asset-classes' menu in order to maximize the investors' gain. Main approaches in use at the present are based on variations of the classical…
Classical mean-variance portfolio theory tells us how to construct a portfolio of assets which has the greatest expected return for a given level of return volatility. Utility theory then allows an investor to choose the point along this…
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…
In this paper we derive the exact solution of the multi-period portfolio choice problem for an exponential utility function under return predictability. It is assumed that the asset returns depend on predictable variables and that the joint…
As the cornerstone of modern portfolio theory, Markowitz's mean-variance optimization is considered a major model adopted in portfolio management. However, due to the difficulty of estimating its parameters, it cannot be applied to all…
We consider the problem of selecting a portfolio of assets that provides the investor a suitable balance of expected return and risk. With respect to the seminal mean-variance model of Markowitz, we consider additional constraints on the…
Markowitz's criterion aims to balance expected return and risk when optimizing the portfolio. The expected return level is usually fixed according to the risk appetite of an investor, then the risk is minimized at this fixed return level.…
Stock price prediction is a challenging task and a lot of propositions exist in the literature in this area. Portfolio construction is a process of choosing a group of stocks and investing in them optimally to maximize the return while…
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…
In this paper, we revisit the relationship between investors' utility functions and portfolio allocation rules. We derive portfolio allocation rules for asymmetric Laplace distributed $ALD(\mu,\sigma,\kappa)$ returns and compare them with…
In this study, we propose a new multi-objective portfolio optimization with idiosyncratic and systemic risks for financial networks. The two risks are measured by the idiosyncratic variance and the network clustering coefficient derived…