Related papers: Semi-metric portfolio optimization: a new algorith…
Portfolio optimization has long been dominated by covariance-based strategies, such as the Markowitz Mean-Variance framework. However, these approaches often fail to ensure a balanced risk structure across assets, leading to concentration…
Portfolio optimization methods have evolved significantly since Markowitz introduced the mean-variance framework in 1952. While the theoretical appeal of this approach is undeniable, its practical implementation poses important challenges,…
In this paper, we propose a market model with returns assumed to follow a multivariate normal tempered stable distribution defined by a mixture of the multivariate normal distribution and the tempered stable subordinator. This distribution…
In finance industry portfolio construction deals with how to divide the investors' wealth across an asset-classes' menu in order to maximize the investors' gain. Main approaches in use at the present are based on variations of the classical…
In this paper we consider the strategic asset allocation of an insurance company. This task can be seen as a special case of portfolio optimization. In the 1950s, Markowitz proposed to formulate portfolio optimization as a bicriteria…
We consider the problem of optimizing a portfolio of financial assets, where the number of assets can be much larger than the number of observations. The optimal portfolio weights require estimating the inverse covariance matrix of excess…
This paper explores the practical approach to portfolio selection methods for investments. The study delves into portfolio theory, discussing concepts such as expected return, variance, asset correlation, and opportunity sets. It also…
We propose an alternative linearization to the classical Markowitz quadratic portfolio optimization model, based on maximum drawdown. This model, which minimizes maximum portfolio drawdown, is particularly appealing during times of…
We briefly review the approach to optimization of portfolios according to the theory of Markowitz and propose a further modification that can improve the outcome of the optimization process. The modification takes account of the entropic…
We introduce a novel approach to portfolio optimization that leverages hierarchical graph structures and the Schur complement method to systematically reduce computational complexity while preserving full covariance information. Inspired by…
In this work, we consider weighted signed network representations of financial markets derived from raw or denoised correlation matrices, and examine how negative edges can be exploited to reduce portfolio risk. We then propose a discrete…
We consider the problem of portfolio selection within the classical Markowitz mean-variance framework, reformulated as a constrained least-squares regression problem. We propose to add to the objective function a penalty proportional to the…
Since Markowitz's mean-variance framework, optimizing a portfolio that maximizes the profit and minimizes the risk has been ubiquitous in the financial industry. Initially, profit and risk were measured by the first two moments of the…
In this study, we propose a new multi-objective portfolio optimization with idiosyncratic and systemic risks for financial networks. The two risks are measured by the idiosyncratic variance and the network clustering coefficient derived…
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…
The main contribution of the paper is to employ the financial market network as a useful tool to improve the portfolio selection process, where nodes indicate securities and edges capture the dependence structure of the system. Three…
In this paper, we develop a time-series-based signed network model for dimensionality reduction in portfolio optimization, grounded in Markowitz's portfolio theory and extended to incorporate higher-order moments of asset return…
The potential benefits of portfolio diversification have been known to investors for a long time. Markowitz (1952) suggested the seminal approach for optimizing the portfolio problem based on finding the weights as budget shares that…
This paper aims to develop new mathematical and computational tools for modeling the distribution of portfolio returns across portfolios. We establish relevant mathematical formulas and propose efficient algorithms, drawing upon powerful…
The paper studies problem of continuous time optimal portfolio selection for a incom- plete market diffusion model. It is shown that, under some mild conditions, near optimal strategies for investors with different performance criteria can…