Related papers: Optimal allocation using the Sortino ratio
The question addressed in this paper is the performance of the optimal strategy, and the impact of partial information. The setting we consider is that of a stochastic asset price model where the trend follows an unobservable…
In this work, we consider the optimal portfolio selection problem under hard constraints on trading amounts, transaction costs and different rates for borrowing and lending when the risky asset returns are serially correlated. No…
We consider optimal consumption and portfolio choice in the presence of Knightian uncertainty in continuous-time. We embed the problem into the new framework of stochastic calculus for such settings, dealing in particular with the issue of…
This article is the term paper of the course Investments. We mainly focus on modeling long-term investment decisions of a typical utility-maximizing individual, with features of Chinese stock market in perspective. We adopt an OR based…
Following a series of works on capital growth investment, we analyse log-optimal portfolios where the return evaluation includes `weights' of different outcomes. The results are twofold: (A) under certain conditions, the logarithmic growth…
We consider an investor who seeks to maximize her expected utility derived from her terminal wealth relative to the maximum performance achieved over a fixed time horizon, and under a portfolio drawdown constraint, in a market with local…
We study dynamic optimal portfolio allocation for monotone mean--variance preferences in a general semimartingale model. Armed with new results in this area we revisit the work of Cui, Li, Wang and Zhu (2012, MAFI) and fully characterize…
We consider a reference security, understood to be an attractive investment, with the caveat that an investor is not willing to directly invest in the security, for presence of constraints, either investor specific or pertaining to the…
We report a new optimal resolution for the statistical stratification problem under proportional sampling allocation among strata. Consider a finite population of N units, a random sample of n units selected from this population and a…
High precision analytical approximation is proposed for variance-covariance based risk allocation in a portfolio of risky assets. A general case of a single-period multi-factor Merton-type model with stochastic recovery is considered. The…
This paper studies dynamic asset allocation with interest rate risk and several sources of ambiguity. The market consists of a risk-free asset, a zero-coupon bond (both determined by a Vasicek model), and a stock. There is ambiguity about…
We introduce a novel theoretical framework for Return On Investment (ROI) maximization in repeated decision-making. Our setting is motivated by the use case of companies that regularly receive proposals for technological innovations and…
We propose and study a simple model of dynamical redistribution of capital in a diversified portfolio. We consider a hypothetical situation of a portfolio composed of N uncorrelated stocks. Each stock price follows a multiplicative random…
In classic Kelly gambling, bets are chosen to maximize the expected log growth of wealth, under a known probability distribution. Breiman provides rigorous mathematical proofs that Kelly strategy maximizes the rate of asset growth…
Market timing is an investment technique that tries to continuously switch investment into assets forecast to have better returns. What is the likelihood of having a successful market timing strategy? With an emphasis on modeling…
The Kelly criterion provides a general framework for optimizing the growth rate of an investment portfolio over time by maximizing the expected logarithmic utility of wealth. However, the optimality condition of the Kelly criterion is…
Selecting the optimal Markowitz porfolio depends on estimating the covariance matrix of the returns of $N$ assets from $T$ periods of historical data. Problematically, $N$ is typically of the same order as $T$, which makes the sample…
We attempt to mitigate the persistent tradeoff between risk and return in medium- to long-term portfolio management. This paper proposes a novel LLM-guided no-regret portfolio allocation framework that integrates online learning dynamics,…
Statistical arbitrage exploits temporal price differences between similar assets. We develop a unifying conceptual framework for statistical arbitrage and a novel data driven solution. First, we construct arbitrage portfolios of similar…
We consider the allocation of indivisible objects among agents with different valuations, which can be positive or negative. An egalitarian allocation is an allocation that maximizes the smallest value given to an agent; finding such an…