Related papers: Geometric insights into robust portfolio construct…
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…
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…
In this paper, we discuss the ambiguous chance constrained based portfolio optimization problems, in which the perturbations associated with the input parameters are stochastic in nature, but their distributions are not known precisely. We…
In this paper, we explore the portfolio allocation problem involving an uncertain covariance matrix. We calculate the expected value of the Constant Absolute Risk Aversion (CARA) utility function, marginalized over a distribution of…
Beta-sorted portfolios -- portfolios comprised of assets with similar covariation to selected risk factors -- are a popular tool in empirical finance to analyze models of (conditional) expected returns. Despite their widespread use, little…
We propose a data-driven portfolio selection model that integrates side information, conditional estimation and robustness using the framework of distributionally robust optimization. Conditioning on the observed side information, the…
This paper presents how the most recent improvements made on covariance matrix estimation and model order selection can be applied to the portfolio optimisation problem. The particular case of the Maximum Variety Portfolio is treated but…
We develop a new analysis for portfolio optimisation with options, tackling the three fundamental issues with this problem: asymmetric options' distributions, high dimensionality and dependence structure. To do so, we propose a new…
Classical mean-variance portfolio theory tells us how to construct a portfolio of assets which has the greatest expected return for a given level of return volatility. Utility theory then allows an investor to choose the point along this…
We study the optimal portfolio allocation problem from a Bayesian perspective using value at risk (VaR) and conditional value at risk (CVaR) as risk measures. By applying the posterior predictive distribution for the future portfolio…
We introduce a covariance matrix estimator that both takes into account the heteroskedasticity of financial returns (by using an exponentially weighted moving average) and reduces the effective dimensionality of the estimation (and hence…
Growth-optimal portfolios are guaranteed to accumulate higher wealth than any other investment strategy in the long run. However, they tend to be risky in the short term. For serially uncorrelated markets, similar portfolios with more…
This paper studies the continuous time mean-variance portfolio selection problem with one kind of non-linear wealth dynamics. To deal the expectation constraint, an auxiliary stochastic control problem is firstly solved by two new…
In these notes we discuss investment allocation to multiple alpha streams traded on the same execution platform, including when trades are crossed internally resulting in turnover reduction. We discuss approaches to alpha weight…
We give an explicit algorithm and source code for combining alpha streams via bounded regression. In practical applications typically there is insufficient history to compute a sample covariance matrix (SCM) for a large number of alphas. To…
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…
The global minimum-variance portfolio is a typical choice for investors because of its simplicity and broad applicability. Although it requires only one input, namely the covariance matrix of asset returns, estimating the optimal solution…
This paper investigates performance attribution measures as a basis for constraining portfolio optimization. We employ optimizations that minimize expected tail loss and investigate both asset allocation (AA) and the selection effect (SE)…
This paper studies a type of periodic utility maximization problems for portfolio management in incomplete stochastic factor models with convex trading constraints. The portfolio performance is periodically evaluated on the relative ratio…
Portfolio optimization methods suffer from a catalogue of known problems, mainly due to the facts that pair correlations of asset returns are unstable, and that extremal risk measures such as maximum drawdown are difficult to predict due to…