Related papers: Dynamic investment portfolio optimization using a …
A novel optimisation framework through quadratic nonlinear projection is introduced for credit portfolio when the portfolio risk is measured by Conditional Value-at-Risk (CVaR). The whole optimisation procedure to search toward the optimal…
Jump stochastic volatility models are central to financial econometrics for volatility forecasting, portfolio risk management, and derivatives pricing. Markov Chain Monte Carlo (MCMC) algorithms are computationally unfeasible for the…
We show that financial correlations exhibit a non-trivial dynamic behavior. We introduce a simple phenomenological model of a multi-asset financial market, which takes into account the impact of portfolio investment on price dynamics. This…
This paper proposes analytic forms of portfolio CoVaR and CoCVaR on the normal tempered stable market model. Since CoCVaR captures the relative risk of the portfolio with respect to a benchmark return, we apply it to the relative portfolio…
Motivated by practical applications, we explore the constrained multi-period mean-variance portfolio selection problem within a market characterized by a dynamic factor model. This model captures predictability in asset returns driven by…
Prediction models calibrated using historical data may forecast poorly if the dynamics of the present and future differ from observations in the past. For this reason, predictions can be improved if information like forward looking views…
We review recent progress in modeling credit risk for correlated assets. We start from the Merton model which default events and losses are derived from the asset values at maturity. To estimate the time development of the asset values, the…
In this paper we investigate the expected terminal utility maximization approach for a dynamic stochastic portfolio optimization problem. We solve it numerically by solving an evolutionary Hamilton-Jacobi-Bellman equation which is…
The downside risk of a portfolio of (equity)assets is generally substantially higher than the downside risk of its components. In particular in times of crises when assets tend to have high correlation, the understanding of this difference…
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,…
We study continuous-time portfolio selection under monotone mean-variance (MMV) preferences in a jump-diffusion model, presenting an explicit solution different from that under classical mean-variance (MV) preferences in dynamic settings…
In this paper, we consider the optimal portfolio liquidation problem under the dynamic mean-variance criterion and derive time-consistent solutions in three important models. We give adapted optimal strategies under a reconsidered…
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…
We consider the classical multi-asset Merton investment problem under drift uncertainty, i.e. the asset price dynamics are given by geometric Brownian motions with constant but unknown drift coefficients. The investor assumes a prior drift…
This paper is concerned with the maximum principle and dynamic programming principle for mean-variance portfolio selection of jump diffusions and their relationship. First, the optimal portfolio and efficient frontier of the problem are…
This study contributes to understanding Valuation Adjustments (xVA) by focussing on the dynamic hedging of Credit Valuation Adjustment (CVA), corresponding Profit & Loss (P&L) and the P&L explain. This is done in a Monte Carlo simulation…
We study the problem of active portfolio management where an investor aims to outperform a benchmark strategy's risk profile while not deviating too far from it. Specifically, an investor considers alternative strategies whose terminal…
We consider the portfolio optimization with risk measured by conditional value-at-risk, based on the stress event of chosen asset being equal to the opposite of its value-at-risk level, under the normality assumption. Solvability conditions…
Monotone mean-variance (MMV) utility is the minimal modification of the classical Markowitz utility that respects rational ordering of investment opportunities. This paper provides, for the first time, a complete characterization of optimal…
Online portfolio selection research has so far focused mainly on minimizing regret defined in terms of wealth growth. Practical financial decision making, however, is deeply concerned with both wealth and risk. We consider online learning…