Related papers: Efficient Portfolios
We analyze characteristics' joint predictive information through the lens of out-of-sample power utility functions. Linking weights to characteristics to form optimal portfolios suffers from estimation error which we mitigate by maximizing…
We study a continuous-time Markowitz mean-variance portfolio selection model in which a naive agent, unaware of the underlying time-inconsistency, continuously reoptimizes over time. We define the resulting naive policies through the limit…
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…
We consider an investor, whose portfolio consists of a single risky asset and a risk free asset, who wants to maximize his expected utility of the portfolio subject to the Value at Risk assuming a heavy tail distribution of the stock prices…
The classical Markowitz mean-variance model uses variance as a risk measure and calculates frontier portfolios in closed form by using standard optimization techniques. For general mean-risk models such closed form optimal portfolios are…
We show that the efficient frontier for a portfolio in which short positions precisely offset the long ones is composed of a pair of straight lines through the origin of the risk-return plane. This unique but important case has been…
In recent years, the evaluation of the minimal investment risk of the quenched disordered system of a portfolio optimization problem and the investment concentration of the optimal portfolio has been actively investigated using the analysis…
We study a static portfolio optimization problem with two risk measures: a principle risk measure in the objective function and a secondary risk measure whose value is controlled in the constraints. This problem is of interest when it is…
We discuss - in what is intended to be a pedagogical fashion - generalized "mean-to-risk" ratios for portfolio optimization. The Sharpe ratio is only one example of such generalized "mean-to-risk" ratios. Another example is what we term the…
In finance industry portfolio construction deals with how to divide the investors' wealth across an asset-classes' menu in order to maximize the investors' gain. Main approaches in use at the present are based on variations of the classical…
Managing investment portfolios is an old and well know problem in multiple fields including financial mathematics and financial engineering as well as econometrics and econophysics. Multiple different concepts and theories were used so far…
In this work, we introduce Modern Portfolio Theory using basic concepts from linear algebra, differential calculus, statistics, and optimization. This theory allows us to measure the return and risk of an investment portfolio, serving as a…
Value-at-Risk is one of the most popular risk management tools in the financial industry. Over the past 20 years several attempts to include VaR in the portfolio selection process have been proposed. However, using VaR as a risk measure in…
In a Markovian stochastic volatility model, we consider financial agents whose investment criteria are modelled by forward exponential performance processes. The problem of contingent claim indifference valuation is first addressed and a…
In this paper, the mean-variance portfolio selection problem with Poisson jumps are studied, where the recursive utility is given by the solution to a backward stochastic differential equation with Poisson jumps. Both the maximum principle…
This paper addresses the portfolio selection problem for nonlinear law-dependent preferences in continuous time, which inherently exhibit time inconsistency. Employing the method of stochastic maximum principle, we establish verification…
We consider an investor, whose portfolio consists of a single risky asset and a risk free asset, who wants to maximize his expected utility of the portfolio subject to managing the Value at Risk (VaR) assuming a heavy tailed distribution of…
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…
For long term investments, model portfolios are defined at the level of indexes, a setup known as Strategic Asset Allocation (SAA). The possible outcomes at a scale of a few decades can be obtained by Monte Carlo simulations, resulting in a…
We combine forward investment performance processes and ambiguity averse portfolio selection. We introduce the notion of robust forward criteria which addresses the issues of ambiguity in model specification and in preferences and…