Related papers: Risk Management and Return Prediction
This article studies a portfolio optimization problem, where the market consisting of several stocks is modeled by a multi-dimensional jump-diffusion process with age-dependent semi-Markov modulated coefficients. We study risk sensitive…
We study the problem of portfolio insurance from the point of view of a fund manager, who guarantees to the investor that the portfolio value at maturity will be above a fixed threshold. If, at maturity, the portfolio value is below the…
In this work, we consider the optimal portfolio selection problem under hard constraints on trading volume amounts when the dynamics of the risky asset returns are governed by a discrete-time approximation of the Markov-modulated geometric…
We construct the maximally predictable portfolio (MPP) of stocks using machine learning. Solving for the optimal constrained weights in the multi-asset MPP gives portfolios with a high monthly coefficient of determination, given the sample…
We find economically and statistically significant gains when using machine learning for portfolio allocation between the market index and risk-free asset. Optimal portfolio rules for time-varying expected returns and volatility are…
The asymptotic distribution of the Markowitz portfolio is derived, for the general case (assuming fourth moments of returns exist), and for the case of multivariate normal returns. The derivation allows for inference which is robust to…
The Markowitz problem consists of finding in a financial market a self-financing trading strategy whose final wealth has maximal mean and minimal variance. We study this in continuous time in a general semimartingale model and under cone…
Sequential portfolio selection has attracted increasing interests in the machine learning and quantitative finance communities in recent years. As a mathematical framework for reinforcement learning policies, the stochastic multi-armed…
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…
By using Random Matrix Theory, we build covariance matrices between stocks of the BM&F-Bovespa (Bolsa de Valores, Mercadorias e Futuros de S\~ao Paulo) which are cleaned of some of the noise due to the complex interactions between the many…
An investment portfolio consists of $n$ algorithmic trading strategies, which generate vectors of positions in trading assets. Sign opposite trades (buy/sell) cross each other as strategies are combined in a portfolio. Then portfolio…
This paper concerns portfolio selection with multiple assets under rough covariance matrix. We investigate the continuous-time Markowitz mean-variance problem for a multivariate class of affine and quadratic Volterra models. In this…
We employ model predictive control for a multi-period portfolio optimization problem. In addition to the mean-variance objective, we construct a portfolio whose allocation is given by model predictive control with a risk-parity objective,…
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…
This paper considers the portfolio management problem of optimal investment, consumption and life insurance. We are concerned with time inconsistency of optimal strategies. Natural assumptions, like different discount rates for consumption…
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,…
A classical portfolio theory deals with finding the optimal proportion in which an agent invests a wealth in a risk-free asset and a probabilistic risky asset. Formulating and solving the problem depend on how the risk is represented and…
In the world of modern financial theory, portfolio construction has traditionally operated under at least one of two central assumptions: the constraints are derived from a utility function and/or the multivariate probability distribution…
Consider an investor trading dynamically to maximize expected utility from terminal wealth. Our aim is to study the dependence between her risk aversion and the distribution of the optimal terminal payoff. Economic intuition suggests that…
We introduce polynomial processes in the sense of [8] in the context of stochastic portfolio theory to model simultaneously companies' market capitalizations and the corresponding market weights. These models substantially extend volatility…