Related papers: Portfolio Selection under Multivariate Merton Mode…
This paper presents a new framework for Merton's optimal investment problem which uses the theory of Meyer $\sigma$-fields to allow for signals that possibly warn the investor about impending jumps. With strategies no longer predictable,…
Portfolio managers often evaluate performance relative to benchmark, usually taken to be the Standard & Poor 500 stock index fund. This relative portfolio wealth is defined as the absolute portfolio wealth divided by wealth from investing…
We consider continuous-time mean-variance portfolio selection with bankruptcy prohibition under convex cone portfolio constraints. This is a long-standing and difficult problem not only because of its theoretical significance, but also for…
The multi-armed bandit (MAB) problem is a ubiquitous decision-making problem that exemplifies the exploration-exploitation tradeoff. Standard formulations exclude risk in decision making. Risk notably complicates the basic reward-maximising…
A risk measure that is consistent with the second-order stochastic dominance and additive for sums of independent random variables can be represented as a weighted entropic risk measure (WERM). The expected utility maximization problem with…
In this paper, a new way to integrate volatility information for estimating value at risk (VaR) and conditional value at risk (CVaR) of a portfolio is suggested. The new method is developed from the perspective of Bayesian statistics and it…
Optimal execution of a portfolio have been a challenging problem for institutional investors. Traders face the trade-off between average trading price and uncertainty, and traditional methods suffer from the curse of dimensionality. Here,…
We investigate the portfolio selection problem against the systemic risk which is measured by CoVaR. We first demonstrate that the systemic risk of pure stock portfolios is essentially uncontrollable due to the contagion effect and the…
In this paper, we consider the basic problem of portfolio construction in financial engineering, and analyze how market-based and analytical approaches can be combined to obtain efficient portfolios. As a first step in our analysis, we…
The paper discusses capital allocation using the Euler formula and focuses on the risk measures Value-at-Risk (VaR) and Expected shortfall (ES). Some new results connected to this capital allocation is known. Two examples illustrate that…
We consider the optimization of active extension portfolios. For this purpose, the optimization problem is rewritten as a stochastic programming model and solved using a clever multi-start local search heuristic, which turns out to provide…
We consider optimal allocation problems with Conditional Value-At-Risk (CVaR) constraint. We prove, under very mild assumptions, the convergence of the Sample Average Approximation method (SAA) applied to this problem, and we also exhibit a…
In this paper, we investigate a portfolio investment problem under volatility uncertainty and short-sale constraints market via sublinear expectation which is used to model volatility uncertainty. We assume the stocks admit volatility…
We combine the one-dimensional Monte Carlo simulation and the semi-analytical one-dimensional heat potential method to design an efficient technique for pricing barrier options on assets with correlated stochastic volatility. Our approach…
A method for calculating multi-portfolio time consistent multivariate risk measures in discrete time is presented. Market models for $d$ assets with transaction costs or illiquidity and possible trading constraints are considered on a…
We study the problem of incorporating risk while making combinatorial decisions under uncertainty. We formulate a discrete submodular maximization problem for selecting a set using Conditional-Value-at-Risk (CVaR), a risk metric commonly…
We consider the problem of portfolio optimization with a correlation constraint. The framework is the multiperiod stochastic financial market setting with one tradable stock, stochastic income and a non-tradable index. The correlation…
Managing insurance and financial risk when data is limited is a key task in the insurance industry. In this paper, we focus on cases where the risk distribution is modeled as a mixture with some components estimable to high precision or…
We explore martingale and convex duality techniques to study optimal investment strategies that maximize expected risk-averse utility from consumption and terminal wealth. We consider a market model with jumps driven by (multivariate)…
Accurately estimating risk measures for financial portfolios is critical for both financial institutions and regulators. However, many existing models operate at the aggregate portfolio level and thus fail to capture the complex…