Related papers: A Proposal for Multi-asset Generalised Variance Sw…
We propose a Markov chain model for credit rating changes. We do not use any distributional assumptions on the asset values of the rated companies but directly model the rating transitions process. The parameters of the model are estimated…
Financial markets for Liquified Natural Gas (LNG) are an important and rapidly-growing segment of commodities markets. Like other commodities markets, there is an inherent spatial structure to LNG markets, with different price dynamics for…
We analyze the stability of financial investment networks, where financial institutions hold overlapping portfolios of assets. We consider the effect of portfolio diversification and heterogeneous investments using a random matrix dynamical…
Models for financial risk often assume that underlying asset returns are stationary. However, there is strong evidence that multivariate financial time series entail changes not only in their within-series dependence structure, but also in…
This paper considers the mean variance portfolio management problem. We examine portfolios which contain both primary and derivative securities. The challenge in this context is due to portfolio's nonlinearities. The delta-gamma…
We consider the investor who doesn't trade shares of his portfolio. The investor only observes the current trades made in the market with his securities to estimate the current return, variance, and risks of his unchanged portfolio. We show…
In multi-state life insurance, an adequate balance between analytic tractability, computational efficiency, and statistical flexibility is of great importance. This might explain the popularity of Markov chain modelling, where matrix…
The use of factor stochastic volatility models requires choosing the number of latent factors used to describe the dynamics of the financial returns process; however, empirical evidence suggests that the number and makeup of pertinent…
Given multivariate time series, we study the problem of forming portfolios with maximum mean reversion while constraining the number of assets in these portfolios. We show that it can be formulated as a sparse canonical correlation analysis…
This paper considers the finite horizon portfolio rebalancing problem in terms of mean-variance optimization, where decisions are made based on current information on asset returns and transaction costs. The study's novelty is that the…
We revisit the recently introduced concept of return risk measures (RRMs) and extend it by incorporating risk management via multiple so-called eligible assets. The resulting new class of risk measures, termed multi-asset return risk…
We consider a mean-variance portfolio selection problem in a financial market with contagion risk. The risky assets follow a jump-diffusion model, in which jumps are driven by a multivariate Hawkes process with mutual-excitation effect. The…
We introduce a framework for systemic risk modeling in insurance portfolios using jointly exchangeable arrays, extending classical collective risk models to account for interactions. Joint exchangeability is a more general probabilistic…
This paper focuses on a dynamic multi-asset mean-variance portfolio selection problem under model uncertainty. We develop a continuous time framework for taking into account ambiguity aversion about both expected return rates and…
We study how to assess the potential benefit of diversifying an equity portfolio by investing within and across equity sectors. We analyse 20 years of US stock price data, which includes the global financial crisis (GFC) and the COVID-19…
We consider the consumption-based asset pricing model, derive a new modified basic pricing equation, and present its successive approximations using the Taylor series expansions of the investor's utility during the averaging time interval.…
In this paper we construct a shrinkage estimator of the global minimum variance (GMV) portfolio by a combination of two techniques: Tikhonov regularization and direct shrinkage of portfolio weights. More specifically, we employ a double…
We use the martingale method to discuss the relationship between mean-variance (MV) and monotone mean-variance (MMV) portfolio selections. We propose a unified framework to discuss the relationship in general financial markets without any…
Accurately predicting stock returns is crucial for effective portfolio management. However, existing methods often overlook a fundamental issue in the market, namely, distribution shifts, making them less practical for predicting future…
Growth-optimal portfolios are guaranteed to accumulate higher wealth than any other investment strategy in the long run. However, they tend to be risky in the short term. For serially uncorrelated markets, similar portfolios with more…