Related papers: Dynamic Portfolio Allocation in High Dimensions us…
This paper investigates optimal portfolio strategies in a market where the drift is driven by an unobserved Markov chain. Information on the state of this chain is obtained from stock prices and expert opinions in the form of signals at…
We introduce a faithful representation of the heavy tail multivariate distribution of asset returns, as parsimonous as the Gaussian framework. Using calculation techniques of functional integration and Feynman diagrams borrowed from…
Modeling the time-varying covariance structures of high-dimensional variables is critical across diverse scientific and industrial applications; however, existing approaches exhibit notable limitations in either modeling flexibility or…
We study the construction and rebalancing of sparse index-tracking portfolios from an operational research perspective, with explicit emphasis on uncertainty quantification and implementability. The decision variables are portfolio weights…
This paper studies the portfolio optimization problem when the investor's utility is general and the return and volatility of the risky asset are fast mean-reverting, which are important to capture the fast-time scale in the modeling of…
In practice daily volatility of portfolio returns is transformed to longer holding periods by multiplying by the square-root of time which assumes that returns are not serially correlated. Under this assumption this procedure of scaling can…
This report presents a systematic market-neutral, multi-factor investment strategy for New York Stock Exchange equities with the objective of delivering steady returns while minimizing correlation with the market. A robust feature set is…
In this paper, we propose a price staleness factor model that accounts for pervasive market friction across assets and incorporates relevant covariates. Using large-panel high-frequency data, we derive the maximum likelihood estimators of…
In many fields where the main goal is to produce sequential forecasts for decision making problems, the good understanding of the contemporaneous relations among different series is crucial for the estimation of the covariance matrix. In…
Quantitative Investment, built on the solid foundation of robust financial theories, is at the center stage in investment industry today. The essence of quantitative investment is the multi-factor model, which explains the relationship…
The Total Portfolio Approach and Strategic Asset Allocation are widely viewed as competing frameworks for institutional portfolio management. We argue they differ in a single governance parameter: the tracking error constraint. Using U.S.…
In this paper, we consider the problem of optimization of a portfolio consisting of securities. An investor with an initial capital, is interested in constructing a portfolio of securities. If the prices of securities change, the investor…
Solving large-scale robust portfolio optimization problems is challenging due to the high computational demands associated with an increasing number of assets, the amount of data considered, and market uncertainty. To address this issue, we…
This paper studies model selection consistency for high dimensional sparse regression when data exhibits both cross-sectional and serial dependency. Most commonly-used model selection methods fail to consistently recover the true model when…
We apply numerical dynamic programming techniques to solve discrete-time multi-asset dynamic portfolio optimization problems with proportional transaction costs and shorting/borrowing constraints. Examples include problems with multiple…
Financial markets are inherently non-stationary, with shifting volatility regimes that alter asset co-movements and return distributions. Standard portfolio optimization methods, typically built on stationarity or regime-agnostic…
In order to estimate the conditional risk of a portfolio's return, two strategies can be advocated. A multivariate strategy requires estimating a dynamic model for the vector of risk factors, which is often challenging, when at all…
We introduce diversified risk parity embedded with various reward-risk measures and more generic allocation rules for portfolio construction. We empirically test the proposed reward-risk parity strategies and compare their performance with…
Volatility-based trading strategies have attracted a lot of attention in financial markets due to their ability to capture opportunities for profit from market dynamics. In this article, we propose a new volatility-based trading strategy…
This paper investigates the hedging effectiveness of a dynamic moving window OLS hedging model, formed using wavelet decomposed time-series. The wavelet transform is applied to calculate the appropriate dynamic minimum-variance hedge ratio…