Related papers: The implied Sharpe ratio
We consider the discretized Bachelier model where hedging is done on an equidistant set of times. Exponential utility indifference prices are studied for path-dependent European options and we compute their non-trivial scaling limit for a…
We consider a utility-maximization problem in a general semimartingale financial model, subject to constraints on the number of shares held in each risky asset. These constraints are modeled by predictable convex-set-valued processes whose…
Portfolio optimization aims at constructing a realistic portfolio with significant out-of-sample performance, which is typically measured by the out-of-sample Sharpe ratio. However, due to in-sample optimism, it is inappropriate to use the…
In this article we consider an optimization problem of expected utility maximization of continuous-time trading in a financial market. This trading is constrained by a benchmark for a utility-based shortfall risk measure. The market…
In the paper we develop mathematical tools of quantile hedging in incomplete market. Those could be used for two significant applications: o calculating the \textbf{optimal capital requirement imposed by Solvency II} (Directive 2009/138/EC…
We study the relationship between model complexity and out-of-sample performance in the context of mean-variance portfolio optimization. Representing model complexity by the number of assets, we find that the performance of low-dimensional…
In this paper the valuation problem of a European call option in presence of both stochastic volatility and transaction costs is considered. In the limit of small transaction costs and fast mean reversion, an asymptotic expression for the…
In an incomplete market setting, we consider two financial agents, who wish to price and trade a non-replicable contingent claim. Assuming that the agents are utility maximizers, we propose a transaction price which is a result of the…
We propose a novel portfolio selection approach that manages to ease some of the problems that characterise standard expected utility maximisation. The optimal portfolio is no longer defined as the extremum of a suitably chosen utility…
This paper studies the equity holders' mean-variance optimal portfolio choice problem for (non-)protected participating life insurance contracts. We derive explicit formulas for the optimal terminal wealth and the optimal strategy in the…
We present an algorithm producing a dynamic non-self-financing hedging strategy in an incomplete market corresponding to investor-relevant risk criterion. The optimization is a two stage process that first determines admissible model…
We study the utility indifference price of a European option in the context of small transaction costs. Considering the general setup allowing consumption and a general utility function at final time T, we obtain an asymptotic expansion of…
Financial forecasting plays an important role in making informed decisions for financial stakeholders, specifically in the stock exchange market. In a traditional setting, investors commonly rely on the equity research department for…
Flexibility options, such as demand response, energy storage and interconnection, have the potential to reduce variation in electricity prices between different future scenarios, therefore reducing investment risk. Moreover, investment in…
A Systemic Optimal Risk Transfer Equilibrium (SORTE) was introduced in: "Systemic optimal risk transfer equilibrium", Mathematics and Financial Economics (2021), for the analysis of the equilibrium among financial institutions or in…
It is well established that in a market with inclusion of a risk-free asset the single-period mean-variance efficient frontier is a straight line tangent to the risky region, a fact that is the very foundation of the classical CAPM. In this…
This paper investigates the problem of maximizing expected terminal utility in a discrete-time financial market model with a finite horizon under non-dominated model uncertainty. We use a dynamic programming framework together with…
The existing approaches to sparse wealth allocations (1) are limited to low-dimensional setup when the number of assets is less than the sample size; (2) lack theoretical analysis of sparse wealth allocations and their impact on portfolio…
This paper considers finitely many investors who perform mean-variance portfolio selection under relative performance criteria. That is, each investor is concerned about not only her terminal wealth, but how it compares to the average…
When the in-sample Sharpe ratio is obtained by optimizing over a k-dimensional parameter space, it is a biased estimator for what can be expected on unseen data (out-of-sample). We derive (1) an unbiased estimator adjusting for both sources…