Related papers: Multicriteria asset allocation in practice
Optimal inventory leads to stochastic optimization problems where deterministic delivery decisions have to be made in advance of stochastic demand realizations. Similarly, risk deposits have to be given before the random outcomes of…
In this paper, we revisit the relationship between investors' utility functions and portfolio allocation rules. We derive portfolio allocation rules for asymmetric Laplace distributed $ALD(\mu,\sigma,\kappa)$ returns and compare them with…
This paper studies a robust portfolio optimization problem under the multi-factor volatility model introduced by Christoffersen et al. (2009). The optimal strategy is derived analytically under the worst-case scenario with or without…
Robust optimisation is a well-established framework for optimising functions in the presence of uncertainty. The inherent goal of this problem is to identify a collection of inputs whose outputs are both desirable for the decision maker,…
Optimal portfolio allocation is often formulated as a constrained risk problem, where one aims to minimize a risk measure subject to some performance constraints. This paper presents new Bayesian Optimization algorithms for such constrained…
We show that the Markowitz portfolio is a scalar multiple of another portfolio which replaces the covariance with the second moment matrix, via simple application of the Sherman-Morrison identity. Moreover it is shown that when using…
This paper studies a variable proportion portfolio insurance (VPPI) strategy. The objective is to determine the risk multiplier by maximizing the extended Omega ratio of the investor's cushion, using a binary stochastic benchmark. When the…
It is widely recognized that when classical optimal strategies are applied with parameters estimated from data, the resulting portfolio weights are remarkably volatile and unstable over time. The predominant explanation for this is the…
Designing an optimum portfolio for allocating suitable weights to its constituent assets so that the return and risk associated with the portfolio are optimized is a computationally hard problem. The seminal work of Markowitz that attempted…
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,…
The paper solves the problem of optimal portfolio choice when the parameters of the asset returns distribution, like the mean vector and the covariance matrix are unknown and have to be estimated by using historical data of the asset…
Portfolio optimization is a critical area in finance, aiming to maximize returns while minimizing risk. Metaheuristic algorithms were shown to solve complex optimization problems efficiently, with Genetic Algorithms and Particle Swarm…
Markowitz's celebrated mean--variance portfolio optimization theory assumes that the means and covariances of the underlying asset returns are known. In practice, they are unknown and have to be estimated from historical data. Plugging the…
Systemic risk arises as a multi-layer network phenomenon. Layers represent direct financial exposures of various types, including interbank liabilities, derivative- or foreign exchange exposures. Another network layer of systemic risk…
This paper studies the multi-period mean-variance portfolio allocation problem with transaction costs. Many methods have been proposed these last years to challenge the famous uni-period Markowitz strategy.But these methods cannot integrate…
The portfolio optimization problem in which the variances of the return rates of assets are not identical is analyzed in this paper using the methodology of statistical mechanical informatics, specifically, replica analysis. We define two…
Financial institutions are currently required to meet more stringent capital requirements than they were before the recent financial crisis; in particular, the capital requirement for a large bank's trading book under the Basel 2.5 Accord…
Integer variables allow the treatment of some portfolio optimization problems in a more realistic way and introduce the possibility of adding some natural features to the model. We propose an algebraic approach to maximize the expected…
In this paper, we propose a market model with returns assumed to follow a multivariate normal tempered stable distribution defined by a mixture of the multivariate normal distribution and the tempered stable subordinator. This distribution…
Current approaches to fair valuation in insurance often follow a two-step approach, combining quadratic hedging with application of a risk measure on the residual liability, to obtain a cost-of-capital margin. In such approaches, the…