Related papers: Optimising portfolio diversification and dimension…
In portfolio optimization, decision makers face difficulties from uncertainties inherent in real-world scenarios. These uncertainties significantly influence portfolio outcomes in both classical and multi-objective Markowitz models. To…
We consider the optimization of active extension portfolios. For this purpose, the optimization problem is rewritten as a stochastic programming model and solved using a clever multi-start local search heuristic, which turns out to provide…
We develop a general theory of risk measures that determines the optimal amount of capital to raise and invest in a portfolio of reference traded securities in order to meet a pre-specified regulatory requirement. The distinguishing feature…
This article develops the theory of risk budgeting portfolios, when we would like to impose weight constraints. It appears that the mathematical problem is more complex than the traditional risk budgeting problem. The formulation of the…
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…
A framework for risk-averse optimization problems is introduced that is resilient to ambiguities in the true form of the underlying probability distribution. The focus is on problems with partial differential equations (PDEs) as…
We consider the optimal allocation of generic resources among multiple generic entities of interest over a finite planning horizon, where each entity generates stochastic returns as a function of its resource allocation during each period.…
In this work, we deal with the problem of computing a comprehensive front of efficient solutions in multi-objective portfolio optimization problems in presence of sparsity constraints. We start the discussion pointing out some weaknesses of…
We propose and study a simple model of dynamical redistribution of capital in a diversified portfolio. We consider a hypothetical situation of a portfolio composed of N uncorrelated stocks. Each stock price follows a multiplicative random…
Integer variables allow the treatment of some portfolio optimization problems in a more realistic way and introduce the possibility of adding some natural features to the model. We propose an algebraic approach to maximize the expected…
In this paper we estimate the mean-variance portfolio in the high-dimensional case using the recent results from the theory of random matrices. We construct a linear shrinkage estimator which is distribution-free and is optimal in the sense…
The majority of standard approaches to financial portfolio optimization (PO) are based on the mean-variance (MV) framework. Given a risk aversion coefficient, the MV procedure yields a single portfolio that represents the optimal trade-off…
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…
The optimization of functions to find the best solution according to one or several objectives has a central role in many engineering and research fields. Recently, a new family of optimization algorithms, named Quality-Diversity…
Traditional optimization algorithms search for a single global optimum that maximizes (or minimizes) the objective function. Multimodal optimization algorithms search for the highest peaks in the search space that can be more than one.…
Portfolio diversification is one of the most effective ways to minimize investment risk. Individuals and fund managers aim to create a portfolio of assets that not only have high returns but are also uncorrelated. This goal can be achieved…
We investigate how and when to diversify capital over assets, i.e., the portfolio selection problem, from a signal processing perspective. To this end, we first construct portfolios that achieve the optimal expected growth in i.i.d.…
We address the problem of partial index tracking, replicating a benchmark index using a small number of assets. Accurate tracking with a sparse portfolio is extensively studied as a classic finance problem. However in practice, a tracking…
We develop a new analysis for portfolio optimisation with options, tackling the three fundamental issues with this problem: asymmetric options' distributions, high dimensionality and dependence structure. To do so, we propose a new…
This paper studies the portfolio optimization problem when the investor's utility is general and the return and volatility of the risky asset are fast mean-reverting, which are important to capture the fast-time scale in the modeling of…