Related papers: Exact Solution for the Portfolio Diversification P…
In this paper, we propose a new class of optimization problems, which maximize the terminal wealth and accumulated consumption utility subject to a mean variance criterion controlling the final risk of the portfolio. The multiple-objective…
We propose a method for extending a given asset pricing formula to account for two additional sources of risk: the risk associated with future changes in market--calibrated parameters and the remaining risk associated with idiosyncratic…
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…
A classical portfolio theory deals with finding the optimal proportion in which an agent invests a wealth in a risk-free asset and a probabilistic risky asset. Formulating and solving the problem depend on how the risk is represented and…
Traditional Markowitz portfolio optimization constrains daily portfolio variance to a target value, optimising returns, Sharpe or variance within this constraint. However, this approach overlooks the relationship between variance at…
Given a set of assets and an investment capital, the classical portfolio selection problem consists in determining the amount of capital to be invested in each asset in order to build the most profitable portfolio. The portfolio…
This paper derives an optimal portfolio that is based on trend-following signal. Building on an earlier related article, it provides a unifying theoretical setting to introduce an autocorrelation model with the covariance matrix of trends…
The portfolio optimization problem is a critical issue in asset management and has long been studied. Markowitz's mean-variance model has fundamental limitations, such as the assumption of a normal distribution for returns and sensitivity…
We study an optimal investment/consumption problem in a model capturing market and credit risk dependencies. Stochastic factors drive both the default intensity and the volatility of the stocks in the portfolio. We use the martingale…
We describe an optimization-based tax-aware portfolio construction method that adds tax liability to standard Markowitz-based portfolio construction. Our method produces a trade list that specifies the number of shares to buy of each asset…
In this work, we introduce Modern Portfolio Theory using basic concepts from linear algebra, differential calculus, statistics, and optimization. This theory allows us to measure the return and risk of an investment portfolio, serving as a…
We study the Merton problem of optimal consumption-investment for the case of two investors sharing a final wealth. The typical example would be a husband and wife sharing a portfolio looking to optimize the expected utility of consumption…
Portfolio optimization is a ubiquitous problem in financial mathematics that relies on accurate estimates of covariance matrices for asset returns. However, estimates of pairwise covariance could be better and calculating time-sensitive…
This paper studies the multi-period mean-variance portfolio allocation problem with transaction costs. Many methods have been proposed these last years to challenge the famous uni-period Markowitz strategy.But these methods cannot integrate…
Numerical challenges inherent in algorithms for computing worst Value-at-Risk in homogeneous portfolios are identified and solutions as well as words of warning concerning their implementation are provided. Furthermore, both conceptual and…
Individual investors are now massively using online brokers to trade stocks with convenient interfaces and low fees, albeit losing the advice and personalization traditionally provided by full-service brokers. We frame the problem faced by…
We investigate the optimal investment-reinsurance problem for insurance company with partial information on the market price of the risk. Through the use of filtering techniques we convert the original optimization problem involving…
This paper considers the constrained portfolio optimization in a generalized life-cycle model. The individual with a stochastic income manages a portfolio consisting of stocks, a bond, and life insurance to maximize his or her consumption…
We consider how to optimally allocate investments in a portfolio of competing technologies using the standard mean-variance framework of portfolio theory. We assume that technologies follow the empirically observed relationship known as…
In this paper, we revisit the portfolio optimization problems of the minimization/maximization of investment risk under constraints of budget and investment concentration (primal problem) and the maximization/minimization of investment…