Related papers: Refined model of the covariance/correlation matrix…
Covariance matrices estimated from short, noisy, and non-Gaussian financial time series are notoriously unstable. Empirical evidence suggests that such covariance structures often exhibit power-law scaling, reflecting complex, hierarchical…
Asynchronous trading in high-frequency financial markets introduces significant biases into econometric analysis, distorting risk estimates and leading to suboptimal portfolio decisions. Existing synchronization methods, such as the…
In this paper, we introduce a large system of interacting financial agents in which each agent is faced with the decision of how to allocate his capital between a risky stock or a risk-less bond. The investment decision of investors,…
We extend and test empirically the multifractal model of asset returns based on a multiplicative cascade of volatilities from large to small time scales. The multifractal description of asset fluctuations is generalized into a multivariate…
This paper proposes analytic forms of portfolio CoVaR and CoCVaR on the normal tempered stable market model. Since CoCVaR captures the relative risk of the portfolio with respect to a benchmark return, we apply it to the relative portfolio…
This paper introduces a new functional optimization approach to portfolio optimization problems by treating the unknown weight vector as a function of past values instead of treating them as fixed unknown coefficients in the majority of…
Market traders often engage in the frequent transaction of volatile assets to optimize their total return. In this study, we introduce a novel investment strategy model, anchored on the 'lazy factor.' Our approach bifurcates into a Price…
This paper uses new and recently established methodologies to study the evolutionary dynamics of the cryptocurrency market, and compares the findings with that of the equity market. We begin by applying random matrix theory and principal…
Kelly's Criterion is well known among gamblers and investors as a method for maximizing the returns one would expect to observe over long periods of betting or investing. These ideas are conspicuously absent from portfolio optimization…
We discuss some methods to quantitatively investigate the properties of correlation matrices. Correlation matrices play an important role in portfolio optimization and in several other quantitative descriptions of asset price dynamics in…
This paper tackles forecast combination with many forecasts or minimum variance portfolio selection with many assets. A novel convex problem called L2-relaxation is proposed. In contrast to standard formulations, L2-relaxation minimizes the…
We provide analytical results for a static portfolio optimization problem with two coherent risk measures. The use of two risk measures is motivated by joint decision-making for portfolio selection where the risk perception of the portfolio…
Portfolio selection is the central task for assets management, but it turns out to be very challenging. Methods based on pattern matching, particularly the CORN-K algorithm, have achieved promising performance on several stock markets. A…
Multifractal processes are a relatively new tool of stock market analysis. Their power lies in the ability to take multiple orders of autocorrelations into account explicitly. In the first part of the paper we discuss the framework of the…
In this paper, motivated by the celebrated work of Kelly, we consider the problem of portfolio weight selection to maximize expected logarithmic growth. Going beyond existing literature, our focal point here is the rebalancing frequency…
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…
In an efficient stock market, the returns and their time-dependent volatility are often jointly modeled by stochastic volatility models (SVMs). Over the last few decades several SVMs have been proposed to adequately capture the defining…
We provided proof here that coefficient of variation (CV) is a direct measure of risk using an equation that has been derived here for the first time. We also presented a method to generate a stock CV based on return that strongly…
We build a multiassets heterogeneous agents model with fundamentalists and chartists, who make investment decisions by maximizing the constant relative risk aversion utility function. We verify that the model can reproduce the main stylized…
We propose a new approach to portfolio optimization that utilizes a unique combination of synthetic data generation and a CVaR-constraint. We formulate the portfolio optimization problem as an asset allocation problem in which each asset…