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We address a portfolio selection problem that combines active (outperformance) and passive (tracking) objectives using techniques from convex analysis. We assume a general semimartingale market model where the assets' growth rate processes…
I discuss some theoretical results with a view to motivate some practical choices in portfolio optimization. Even though the setting is not completely general (for example, the covariance matrix is assumed to be non-singular), I attempt to…
Almost twenty years ago, E.R. Fernholz introduced portfolio generating functions which can be used to construct a variety of portfolios, solely in the terms of the individual companies' market weights. I. Karatzas and J. Ruf recently…
Despite the high importance of grouping in practice, there exists little research on the respective topic. The present work presents a complete framework for grouping and a novel method to optimize model points. Model points are used to…
We study an optimization-based approach to con- struct a mean-reverting portfolio of assets. Our objectives are threefold: (1) design a portfolio that is well-represented by an Ornstein-Uhlenbeck process with parameters estimated by maximum…
We focus on a behavioral model, that has been recently proposed in the literature, whose rational can be traced back to the Half-Full/Half-Empty glass metaphor. More precisely, we generalize the Half-Full/Half-Empty approach to the context…
This paper explores the effectiveness of high-frequency options trading strategies enhanced by advanced portfolio optimization techniques, investigating their ability to consistently generate positive returns compared to traditional long or…
We advocate the use of Agnostic Allocation for the construction of long-only portfolios of stocks. We show that Agnostic Allocation Portfolios (AAPs) are a special member of a family of risk-based portfolios that are able to mitigate…
In financial investing, universal portfolios are a means of constructing portfolios which guarantee a certain level of performance relative to a baseline, while making no statistical assumptions about the future market data. They fall under…
In the context of stochastic portfolio theory we introduce a novel class of portfolios which we call linear path-functional portfolios. These are portfolios which are determined by certain transformations of linear functions of a…
We apply the knockoff procedure to factor selection in finance. By building fake but realistic factors, this procedure makes it possible to control the fraction of false discovery in a given set of factors. To show its versatility, we apply…
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 studies the continuous time mean-variance portfolio selection problem with one kind of non-linear wealth dynamics. To deal the expectation constraint, an auxiliary stochastic control problem is firstly solved by two new…
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…
A Hedge Fund Index is very useful for tracking the performance of hedge fund investments, especially the timing of fund redemption. This paper presents a methodology for constructing a hedge fund index that is more like a quantitative fund…
Business taxonomies are indispensable tools for investors to do equity research and make professional decisions. However, to identify the structure of industry sectors in an emerging market is challenging for two reasons. First, existing…
This paper introduces a software component created in Visual Basic for Applications (VBA) that can be applied for creating an optimal portfolio using two different methods. The first method is the seminal approach of Markowitz that is based…
This thesis investigates Merton's portfolio problem under two different rough Heston models, which have a non-Markovian structure. The motivation behind this choice of problem is due to the recent discovery and success of rough volatility…
A new framework for portfolio diversification is introduced which goes beyond the classical mean-variance approach and portfolio allocation strategies such as risk parity. It is based on a novel concept called portfolio dimensionality that…
A technique from stochastic portfolio theory [Fernholz, 1998] is applied to analyse equity returns of Small, Mid and Large cap portfolios in an emerging market through periods of growth and regional crises, up to the onset of the global…