Related papers: Relationship between optimal portfolios which can …
The typical behavior of optimal solutions to portfolio optimization problems with absolute deviation and expected shortfall models using replica analysis was pioneeringly estimated by S. Ciliberti and M. M\'ezard [Eur. Phys. B. 57, 175…
We study a dynamic portfolio optimization problem related to convergence trading, which is an investment strategy that exploits temporary mispricing by simultaneously buying relatively underpriced assets and selling short relatively…
Optimizing portfolio performance is a fundamental challenge in financial modeling, requiring the integration of advanced clustering techniques and data-driven optimization strategies. This paper introduces a comparative backtesting approach…
In this paper we consider the problem of minimising drawdown in a portfolio of financial assets. Here drawdown represents the relative opportunity cost of the single best missed trading opportunity over a specified time period. We formulate…
This paper studies an $\alpha$-robust utility maximization problem where an investor faces an intractable claim -- an exogenous contingent claim with known marginal distribution but unspecified dependence structure with financial market…
In this paper, we consider the problem of optimization of a portfolio consisting of securities. An investor with an initial capital, is interested in constructing a portfolio of securities. If the prices of securities change, the investor…
In the present work, the optimal portfolio minimizing the investment risk with cost is discussed analytically, where this objective function is constructed in terms of two negative aspects of investment, the risk and cost. We note the…
We investigate the ergodic problem of growth-rate maximization under a class of risk constraints in the context of incomplete, It\^{o}-process models of financial markets with random ergodic coefficients. Including {\em value-at-risk}…
We consider a single-period portfolio selection problem for an investor, maximizing the expected ratio of the portfolio utility and the utility of a best asset taken in hindsight. The decision rules are based on the history of stock returns…
This paper studies a variable proportion portfolio insurance (VPPI) strategy. The objective is to determine the risk multiplier by maximizing the extended Omega ratio of the investor's cushion, using a binary stochastic benchmark. When the…
In portfolio risk minimization, the inverse covariance matrix of returns is often unknown and has to be estimated in practice. This inverse covariance matrix also prescribes the hedge trades in which a stock is hedged by all the other…
This paper considers the mean-reverting portfolio design problem arising from statistical arbitrage in the financial markets. We first propose a general problem formulation aimed at finding a portfolio of underlying component assets by…
The problem of finding the optimal portfolio for investors is called the portfolio optimization problem. Such problem mainly concerns the expectation and variability of return (i.e., mean and variance). Although the variance would be the…
In this paper, we propose a novel investment strategy for portfolio optimization problems. The proposed strategy maximizes the expected portfolio value bounded within a targeted range, composed of a conservative lower target representing a…
Optimal portfolio selection problems are determined by the (unknown) parameters of the data generating process. If an investor wants to realise the position suggested by the optimal portfolios, he/she needs to estimate the unknown…
Risk control and optimal diversification constitute a major focus in the finance and insurance industries as well as, more or less consciously, in our everyday life. We present a discussion of the characterization of risks and of the…
We find economically and statistically significant gains when using machine learning for portfolio allocation between the market index and risk-free asset. Optimal portfolio rules for time-varying expected returns and volatility are…
Portfolio optimisation typically aims to provide an optimal allocation that minimises risk, at a given return target, by diversifying over different investments. However, the potential scope of such risk diversification can be limited if…
This paper studies a continuous-time optimal portfolio selection problem in the complete market for a behavioral investor whose preference is of the prospect type with probability distortion. The investor concerns about the terminal…
The classical mean-variance framework characterizes portfolio risk solely through return variance and the covariance matrix, implicitly assuming that all relevant sources of risk are captured by second moments. In modern financial markets,…