Related papers: MAD Risk Parity Portfolios
This paper explores option portfolio optimization when the underlying returns are skew-elliptical t-distributed. We use the variance and value at risk (VaR) to measure portfolio risk. The novelty of our work is the departure from the…
In several applications such as clinical trials and financial portfolio optimization, the expected value (or the average reward) does not satisfactorily capture the merits of a drug or a portfolio. In such applications, risk plays a crucial…
High precision analytical approximation is proposed for variance-covariance based risk allocation in a portfolio of risky assets. A general case of a single-period multi-factor Merton-type model with stochastic recovery is considered. The…
Providing a measure of market risk is an important issue for investors and financial institutions. However, the existing models for this purpose are per definition symmetric. The current paper introduces an asymmetric capital asset pricing…
This paper is devoted to study the optimal portfolio problem. Harry Markowitz's Ph.D. thesis prepared the ground for the mathematical theory of finance. In modern portfolio theory, we typically find asset returns that are modeled by a…
We propose a two-level, learning-based portfolio method (RL-BHRP) that spreads risk across sectors and stocks, and adjusts exposures as market conditions change. Using U.S. Equities from 2012 to mid-2025, we design the model using 2012 to…
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…
This study presents the Adaptive Minimum-Variance Portfolio (AMVP) framework and the Adaptive Minimum-Risk Rate (AMRR) metric, innovative tools designed to optimize portfolios dynamically in volatile and nonstationary financial markets.…
Stochastic domains often involve risk-averse decision makers. While recent work has focused on how to model risk in Markov decision processes using risk measures, it has not addressed the problem of solving large risk-averse formulations.…
The purpose of the study is to propose a methodology for evaluation and ranking of risky investment projects.An investment certainty equivalence approach dual to the conventional separation of riskless and risky contributions based on cash…
This paper is concerned with portfolio optimization models for creating high-quality lists of recommended items to balance the accuracy and diversity of recommendations. However, the statistics (i.e., expectation and covariance of ratings)…
This study applies the Hierarchical Risk Parity (HRP) portfolio allocation methodology to the NUAM market, a regional holding that integrates the markets of Chile, Colombia and Peru. As one of the first empirical analyses of HRP in this…
Portfolio optimization methods have evolved significantly since Markowitz introduced the mean-variance framework in 1952. While the theoretical appeal of this approach is undeniable, its practical implementation poses important challenges,…
Capital allocation principles are used in various contexts in which a risk capital or a cost of an aggregate position has to be allocated among its constituent parts. We study capital allocation principles in a performance measurement…
The Pareto model is very popular in risk management, since simple analytical formulas can be derived for financial downside risk measures (Value-at-Risk, Expected Shortfall) or reinsurance premiums and related quantities (Large Claim Index,…
The classical mean-variance portfolio selection problem induces time-inconsistent (precommited) strategies (see Zhou and Li (2000)). To overcome this time-inconsistency, Basak and Chabakauri (2010) introduce the game theoretical approach…
Given a reference risk measure, the risk budgeting is the portfolio where each asset contributes a predetermined amount to the total risk. We propose a novel approach, alternative to the ones proposed in the literature, for the calculation…
Risk parity, also known as equal risk contribution, has recently gained increasing attention as a portfolio allocation method. However, solving portfolio weights must resort to numerical methods as the analytic solution is not available.…
The median absolute deviation (MAD) is a robust measure of scale that is simple to implement and easy to interpret. Motivated by this, we introduce interval estimators of the MAD to make reliable inferences for dispersion for a single…
We study Pareto optimality in a decentralized peer-to-peer risk-sharing market where agents' preferences are represented by robust distortion risk measures that are not necessarily convex. We obtain a characterization of Pareto-optimal…