Related papers: Optimal allocation using the Sortino ratio
We assume that an individual invests in a financial market with one riskless and one risky asset, with the latter's price following geometric Brownian motion as in the Black-Scholes model. Under a constant rate of consumption, we find the…
We study an optimal allocation problem for a system of independent Brownian agents whose states evolve under a limited shared control. At each time, a unit of resource can be divided and allocated across components to increase their drifts,…
Stock trading strategy plays a crucial role in investment companies. However, it is challenging to obtain optimal strategy in the complex and dynamic stock market. We explore the potential of deep reinforcement learning to optimize stock…
We consider the problem of dynamic buying and selling of shares from a collection of $N$ stocks with random price fluctuations. To limit investment risk, we place an upper bound on the total number of shares kept at any time. Assuming that…
In this paper we employ a lifecycle model that uses utility of consumption and bequest to determine an optimal Deferred Income Annuity (DIA) purchase policy. We lay out a mathematical framework to formalize the optimization process. The…
This paper studies a sequential decision problem where payoff distributions are known and where the riskiness of payoffs matters. Equivalently, it studies sequential choice from a repeated set of independent lotteries. The decision-maker is…
In multi-objective optimization, a single decision vector must balance the trade-offs between many objectives. Solutions achieving an optimal trade-off are said to be Pareto optimal: these are decision vectors for which improving any one…
The original Kelly criterion provides a strategy to maximize the long-term growth of winnings in a sequence of simple Bernoulli bets with an edge, that is, when the expected return on each bet is positive. The objective of this work is to…
Portfolio management is an essential component of investment strategy that aims to maximize returns while minimizing risk. This paper explores several portfolio management strategies, including asset allocation, diversification, active…
Smart beta, also known as strategic beta or factor investing, is the idea of selecting an investment portfolio in a simple rule-based manner that systematically captures market inefficiencies, thereby enhancing risk-adjusted returns above…
The main objective of this paper is to develop a martingale-type solution to optimal consumption--investment choice problems ([Merton, 1969] and [Merton, 1971]) under time-varying incomplete preferences driven by externalities such as…
We study the problem of computing maximin share guarantees, a recently introduced fairness notion. Given a set of $n$ agents and a set of goods, the maximin share of a single agent is the best that she can guarantee to herself, if she would…
In many competitive settings, from education to politics, rules do not reward effort evenly, and thresholds (e.g., grade cutoffs or electoral majorities) make some moments disproportionately important. Success thus depends on efficiently…
We study optimal investment in a financial market having a finite number of assets from a signal processing perspective. We investigate how an investor should distribute capital over these assets and when he should reallocate the…
This paper studies the robust optimal gain selection problem for financial trading systems, formulated within a \emph{double linear policy} framework, which allocates capital across long and short positions. The key objective is to…
Managing risk in dynamic decision problems is of cardinal importance in many fields such as finance and process control. The most common approach to defining risk is through various variance related criteria such as the Sharpe Ratio or the…
Returns distributions are heavy-tailed across asset classes. In this note, I examine the implications of this well-known stylized fact for the joint statistics of performance (absolute return) and Sharpe ratio (risk-adjusted return). Using…
The optimal taxation of assets requires attention to two concerns: 1) the elasticity of the supply of assets and 2) the impact of taxing assets on distributional objectives. The most efficient way to attend to these two concerns is to tax…
Classical portfolio optimization methods typically determine an optimal capital allocation through the implicit, yet critical, assumption of statistical time-invariance. Such models are inadequate for real-world markets as they employ…
We derive optimality conditions for the optimum sample allocation problem in stratified sampling, formulated as the determination of the fixed strata sample sizes that minimize the total cost of the survey, under the assumed level of…