Related papers: Closed-form portfolio optimization under GARCH mod…
The paper Zhao et al. (2015) shows that mean-CVaR-skewness portfolio optimization problems based on asymetric Laplace (AL) distributions can be transformed into quadratic optimization problems under which closed form solutions can be found.…
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…
This paper introduces a unified approach for modeling high-frequency financial data that can accommodate both the continuous-time jump-diffusion and discrete-time realized GARCH model by embedding the discrete realized GARCH structure in…
This paper offers a new method for estimation and forecasting of the volatility of financial time series when the stationarity assumption is violated. Our general local parametric approach particularly applies to general varying-coefficient…
Monte Carlo Approaches for calculating Value-at-Risk (VaR) are powerful tools widely used by financial risk managers across the globe. However, they are time consuming and sometimes inaccurate. In this paper, a fast and accurate Monte Carlo…
CRRA utility where the risk aversion coefficient is a constant is commonly seen in various economics models. But wealth-driven risk aversion rarely shows up in investor's investment problems. This paper mainly focus on numerical solutions…
The optimal strategies for a long-term static investor are studied. Given a portfolio of a stock and a bond, we derive the optimal allocation of the capitols to maximize the expected long-term growth rate of a utility function of the…
Value-at-Risk (VaR) and Conditional Value-at-Risk (CVaR) are popular risk measures from academic, industrial and regulatory perspectives. The problem of minimizing CVaR is theoretically known to be of Neyman-Pearson type binary solution. We…
There is a great number of factors to take into account when building and managing an investment portfolio. It is widely believed that a proper set-up of the portfolio combined with a good, robust management strategy is the key to…
In this paper we use Gaussian Process (GP) regression to propose a novel approach for predicting volatility of financial returns by forecasting the envelopes of the time series. We provide a direct comparison of their performance to…
We study the optimal portfolio liquidation problem over a finite horizon in a limit order book with bid-ask spread and temporary market price impact penalizing speedy execution trades. We use a continuous-time modeling framework, but in…
This paper investigates optimal portfolio strategies in a financial market where the drift of the stock returns is driven by an unobserved Gaussian mean reverting process. Information on this process is obtained from observing stock returns…
This paper formulates and studies a general continuous-time behavioral portfolio selection model under Kahneman and Tversky's (cumulative) prospect theory, featuring S-shaped utility (value) functions and probability distortions. Unlike the…
Recent years have seen an increased level of interest in pricing equity options under a stochastic volatility model such as the Heston model. Often, simulating a Heston model is difficult, as a standard finite difference scheme may lead to…
The AutoRegressive Conditional Heteroskedasticity (ARCH) and its generalized version (GARCH) family of models have grown to encompass a wide range of specifications, each of them is designed to enhance the ability of the model to capture…
Rough volatility models are very appealing because of their remarkable fit of both historical and implied volatilities. However, due to the non-Markovian and non-semimartingale nature of the volatility process, there is no simple way to…
The "standard" Merton formulation of optimal investment and consumption involves optimizing the integrated lifetime utility of consumption, suitably discounted, together with the discounted future bequest. In this formulation the utility of…
We discuss a class of risk-sensitive portfolio optimization problems. We consider the portfolio optimization model investigated by Nagai in 2003. The model by its nature can include fixed income securities as well in the portfolio. Under…
We introduce a heterogeneous spatiotemporal GARCH model for geostatistical data or processes on networks, e.g., for modelling and predicting financial return volatility across firms in a latent spatial framework. The model combines…
We construct liquidity-adjusted return and volatility using purposely designed liquidity metrics (liquidity jump and liquidity diffusion) that incorporate additional liquidity information. Based on these measures, we introduce a…