Related papers: Risk Management and Return Prediction

Traditional risk-adjusted returns, such as the Treynor, Sharpe, Sortino, and Information ratios, have been pivotal in portfolio asset allocation, focusing on minimizing risk while maximizing profit. Nevertheless, these metrics often fail to…

In risk management it is desirable to grasp the essential statistical features of a time series representing a risk factor. This tutorial aims to introduce a number of different stochastic processes that can help in grasping the essential…

For the past two decades investors have observed long memory and highly correlated behavior of asset classes that does not fit into the framework of Modern Portfolio Theory. Custom correlation and standard deviation estimators consider…

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…

In stochastic portfolio theory, a relative arbitrage is an equity portfolio which is guaranteed to outperform a benchmark portfolio over a finite horizon. When the market is diverse and sufficiently volatile, and the benchmark is the market…

We revisit Markowitz's mean-variance portfolio selection model by considering a distributionally robust version, where the region of distributional uncertainty is around the empirical measure and the discrepancy between probability measures…

We consider the life-cycle optimal portfolio choice problem faced by an agent receiving labor income and allocating her wealth to risky assets and a riskless bond subject to a borrowing constraint. In this paper, to reflect a realistic…

This article introduces a novel hybrid regime identification-forecasting framework designed to enhance multi-asset portfolio construction by integrating asset-specific regime forecasts. Unlike traditional approaches that focus on broad…

In this paper we study the optimal investment and reinsurance problem of an insurance company whose investment preferences are described via a forward dynamic exponential utility in a regime-switching market model. Financial and actuarial…

Possibilistic risk theory starts from the hypothesis that risk is modelled by fuzzy numbers. In particular, in a possibilistic portfolio choice problem, the return of a risky asset will be a fuzzy number. The expected utility operators have…

In this paper, we document a novel machine learning based bottom-up approach for static and dynamic portfolio optimization on, potentially, a large number of assets. The methodology applies to general constrained optimization problems and…

First introduced by Fernholz in stochastic portfolio theory, functionally generated portfolio allows its investment performance to be attributed to directly observable and easily interpretable market quantities. In previous works we showed…

We study the optimal portfolio selection problem under relative performance criteria in the market model with random coefficients from the perspective of many players game theory. We consider five random coefficients which consist of three…

In this paper, we consider a generic interest rate market in the presence of roll-over risk, which generates spreads in spot/forward term rates. We do not require classical absence of arbitrage and rely instead on a minimal market viability…

Given a reference risk measure, the risk budgeting is the portfolio where each asset contributes a predetermined amount to the total risk. We propose a novel approach, alternative to the ones proposed in the literature, for the calculation…

Estimating and assessing the risk of a large portfolio is an important topic in financial econometrics and risk management. The risk is often estimated by a substitution of a good estimator of the volatility matrix. However, the accuracy of…

A fractal approach to the long-short portfolio optimization is proposed. The algorithmic system based on the composition of market-neutral spreads into a single entity was considered. The core of the optimization scheme is a fractal walk…

Portfolio optimization has been a central problem in finance, often approached with two steps: calibrating the parameters and then solving an optimization problem. Yet, the two-step procedure sometimes encounter the "error maximization"…

The first moment and second central moments of the portfolio return, a.k.a. mean and variance, have been widely employed to assess the expected profit and risk of the portfolio. Investors pursue higher mean and lower variance when designing…

This paper investigates portfolio selection within a continuous-time financial market with regime-switching and beliefs-dependent utilities. The market coefficients and the investor's utility function both depend on the market regime, which…