Related papers: Exact Solution for the Portfolio Diversification P…
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…
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…
The main contribution of the paper is to employ the financial market network as a useful tool to improve the portfolio selection process, where nodes indicate securities and edges capture the dependence structure of the system. Three…
We consider the mean--variance portfolio optimization problem under the game theoretic framework and without risk-free assets. The problem is solved semi-explicitly by applying the extended Hamilton--Jacobi--Bellman equation. Although the…
The growing interest in cryptocurrencies has drawn the attention of the financial world to this innovative medium of exchange. This study aims to explore the impact of cryptocurrencies on portfolio performance. We conduct our analysis…
Mean-reverting behavior of individuals assets is widely known in financial markets. In fact, we can construct a portfolio that has mean-reverting behavior and use it in trading strategies to extract profits. In this paper, we show that we…
Recent advances in quantum hardware offer new approaches to solve various optimization problems that can be computationally expensive when classical algorithms are employed. We propose a hybrid quantum-classical algorithm to solve a dynamic…
The investment economy is a main characteristic of prosperous society. The investment portfolio management is a main financial problem, which has to be solved by the investment, commercial and central banks with the application of modern…
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…
We propose a data-driven portfolio selection model that integrates side information, conditional estimation and robustness using the framework of distributionally robust optimization. Conditioning on the observed side information, the…
Risk control and optimal diversification constitute a major focus in the finance and insurance industries as well as, more or less consciously, in our everyday life. We present a discussion of the characterization of risks and of the…
Fixed income has received far less attention than equity portfolio optimisation since Markowitz' original work of 1952, partly as a result of the need to model rates and credit risk. We argue that the shape of the efficient frontier is…
Portfolio diversification is a cornerstone of modern finance, while risk aversion is central to decision theory; both concepts are long-standing and foundational. We investigate their connections by studying how different forms of…
Entropy based ideas find wide-ranging applications in finance for calibrating models of portfolio risk as well as options pricing. The abstracted problem, extensively studied in the literature, corresponds to finding a probability measure…
This article deals with the problem of optimal allocation of capital to corporate bonds in fixed income portfolios when there is the possibility of correlated defaults. Under fairly general assumptions for the distribution of the total net…
Energy markets are strategic to governments and economic development. Several commodities compete as substitutable energy sources and energy diversifiers. Such competition reduces the energy vulnerability of countries as well as portfolios'…
A so called Zipf analysis portofolio management technique is introduced in order to comprehend the risk and returns. Two portofoios are built each from a well known financial index. The portofolio management is based on two approaches: one…
We consider the problem of finding the efficient frontier associated with the risk-return portfolio optimization model. We derive the analytical expression of the efficient frontier for a portfolio of N risky assets, and for the case when a…
We consider the problem of portfolio optimization in the presence of market impact, and derive optimal liquidation strategies. We discuss in detail the problem of finding the optimal portfolio under Expected Shortfall (ES) in the case of…
Diversification is the typical investment strategy of risk-averse agents. However, non-diversified positions that allocate all resources to a single asset, state of the world or revenue stream are common too. We show that whenever finitely…