Related papers: Statistical Arbitrage for Multiple Co-Integrated S…
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…
We study the portfolio problem of maximizing the outperformance probability over a random benchmark through dynamic trading with a fixed initial capital. Under a general incomplete market framework, this stochastic control problem can be…
How to hedge factor risks without knowing the identities of the factors? We first prove a general theoretical result: even if the exact set of factors cannot be identified, any risky asset can use some portfolio of similar peer assets to…
We consider a model of optimal investment and consumption with both habit formation and partial observations in incomplete It\^{o} processes market. The investor chooses his consumption under the addictive habits constraint while only…
In academic literature portfolio risk management and hedging are often versed in the language of stochastic control and Hamilton--Jacobi--Bellman~(HJB) equations in continuous time. In practice the continuous-time framework of stochastic…
In this paper, we consider the problem of optimal investment by an insurer. The insurer invests in a market consisting of a bank account and $m$ risky assets. The mean returns and volatilities of the risky assets depend nonlinearly on…
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…
In this paper, we consider the portfolio optimization problem in a financial market under a general utility function. Empirical results suggest that if a significant market fluctuation occurs, invested wealth tends to have a notable change…
In this paper, the optimal mean-reverting portfolio (MRP) design problem is considered, which plays an important role for the statistical arbitrage (a.k.a. pairs trading) strategy in financial markets. The target of the optimal MRP design…
We study the problem of dynamically trading multiple futures contracts with different underlying assets. To capture the joint dynamics of stochastic bases for all traded futures, we propose a new model involving a multi-dimensional scaled…
We study a stochastic control approach to managed futures portfolios. Building on the Schwartz 97 stochastic convenience yield model for commodity prices, we formulate a utility maximization problem for dynamically trading a single-maturity…
We assume a continuous-time price impact model similar to Almgren-Chriss but with the added assumption that the price impact parameters are stochastic processes modeled as correlated scalar Markov diffusions. In this setting, we develop…
In this paper, we study optimal liquidation problems in a randomly-terminated horizon. We consider the liquidation of a large single-asset portfolio with the aim of minimizing a combination of volatility risk and transaction costs arising…
In this paper, we first conduct a study of the portfolio selection problem, incorporating both exogenous (proportional) and endogenous (resulting from liquidity risk, characterized by a stochastic process) transaction costs through the…
An optimal control problem is considered for a stochastic differential equation with the cost functional determined by a backward stochastic Volterra integral equation (BSVIE, for short). This kind of cost functional can cover the general…
We present a continuous-time portfolio selection framework that reflects goal-based investment principles and mental accounting behavior. In this framework, an investor with multiple investment goals constructs separate portfolios, each…
This paper studies the finite horizon portfolio management by optimally tracking a ratcheting capital benchmark process. It is assumed that the fund manager can dynamically inject capital into the portfolio account such that the total…
We consider a stock that follows a geometric Brownian motion (GBM) and a riskless asset continuously compounded at a constant rate. We assume that the stock can go bankrupt, i.e., lose all of its value, at some exogenous random time…
Statistical arbitrage methods identify mispricings in securities with the goal of building portfolios which are weakly correlated with the market. In pairs trading, an arbitrage opportunity is identified by observing relative price…
We consider the portfolio optimisation problem where the terminal function is an S-shaped utility applied at the difference between the wealth and a random benchmark process. We develop several numerical methods for solving the problem…