Related papers: A Note on Portfolio Optimization with Quadratic Tr…
Recent studies stressed the fact that covariance matrices computed from empirical financial time series appear to contain a high amount of noise. This makes the classical Markowitz Mean-Variance Optimization model unable to correctly…
We consider an investor facing a classical portfolio problem of optimal investment in a log-Brownian stock and a fixed-interest bond, but constrained to choose portfolio and consumption strategies that reduce a dynamic shortfall risk…
We discuss investment allocation to multiple alpha streams traded on the same execution platform with internal crossing of trades and point out differences with allocating investment when alpha streams are traded on separate execution…
The Merton investment-consumption problem is fundamental, both in the field of finance, and in stochastic control. An important extension of the problem adds transaction costs, which is highly relevant from a financial perspective but also…
We discuss the time evolution of quotation of stocks and commodities and show that they form an Ising chain. We show that transaction costs induce arbitrage risk that usually is neglected. The full analysis of the portfolio theory is…
Portfolio optimization is a cornerstone of financial decision-making, traditionally relying on classical algorithms to balance risk and return. Recent advances in quantum computing offer a promising alternative, leveraging quantum…
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.…
This paper addresses a novel \emph{cost-sensitive} distributionally robust log-optimal portfolio problem, where the investor faces \emph{ambiguous} return distributions, and a general convex transaction cost model is incorporated. The…
Stochastic algorithms are among the best for solving computationally hard search and reasoning problems. The runtime of such procedures is characterized by a random variable. Different algorithms give rise to different probability…
We study how transaction cost affects to the equilibrium return and optimal stock holdings in equilibrium. To this end, we develop a continuous-time risk-sharing model where heterogenous agents trade toward terminal target holdings subject…
In this paper we investigate a new class of growth rate maximization problems based on impulse control strategies such that the average number of trades per time unit does not exceed a fixed level. Moreover, we include proportional…
A critical problem in the financial world deals with the management of risk, from regulatory risk to portfolio risk. Many such problems involve the analysis of securities modelled by complex dynamics that cannot be captured analytically,…
Duality for robust hedging with proportional transaction costs of path dependent European options is obtained in a discrete time financial market with one risky asset. Investor's portfolio consists of a dynamically traded stock and a static…
This work discusses the benefits of constrained portfolio turnover strategies for small to medium-sized portfolios. We propose a dynamic multi-period model that aims to minimize transaction costs and maximize terminal wealth levels whilst…
The aim of this short note is to establish a limit theorem for the optimal trading strategies in the setup of the utility maximization problem with proportional transaction costs. This limit theorem resolves the open question from [4]. The…
We investigate the application of two heuristic methods, genetic algorithms and tabu/scatter search, to the optimisation of realistic portfolios. The model is based on the classical mean-variance approach, but enhanced with floor and…
This paper presents novel bilevel leader-follower portfolio selection problems in which the financial intermediary becomes a decision-maker. This financial intermediary decides on the unit transaction costs for investing in some securities,…
In this article we study a multi-asset version of the Merton investment and consumption problem with proportional transaction costs. In general it is difficult to make analytical progress towards a solution in such problems, but we…
Portfolio optimization involves selecting asset weights to minimize a risk-reward objective, such as the portfolio variance in the classical minimum-variance framework. Sparse portfolio selection extends this by imposing a cardinality…
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…