Related papers: Discrete-time risk sensitive portfolio optimizatio…
In this paper, we propose a data-driven sliding window approach to solve a log-optimal portfolio problem. In contrast to many of the existing papers, this approach leads to a trading strategy with time-varying portfolio weights rather than…
In this work, we consider the optimal portfolio selection problem under hard constraints on trading amounts, transaction costs and different rates for borrowing and lending when the risky asset returns are serially correlated. No…
This paper investigates a continuous-time portfolio optimization problem with the following features: (i) a no-short selling constraint; (ii) a leverage constraint, that is, an upper limit for the sum of portfolio weights; and (iii) a…
We investigate the optimal strategy over a finite time horizon for a portfolio of stock and bond and a derivative in an multiplicative Markovian market model with transaction costs (friction). The optimization problem is solved by a…
We consider the mean--variance portfolio optimization problem under the game theoretic framework and without risk-free assets. The problem is solved semi-explicitly by applying the extended Hamilton--Jacobi--Bellman equation. Although the…
This paper focuses on managing the cost of deliberation before action. In many problems, the overall quality of the solution reflects costs incurred and resources consumed in deliberation as well as the cost and benefit of execution, when…
We consider a piecewise deterministic Markov decision process, where the expected exponential utility of total (nonnegative) cost is to be minimized. The cost rate, transition rate and post-jump distributions are under control. The state…
Proportional transaction costs present difficult theoretical problems in trading algorithm design, on account of their lack of analytical tractability. The author derives a solution of DT-NT-DT form for an arbitrary model in which the the…
We consider a discrete-time dividend payout problem with risk sensitive shareholders. It is assumed that they are equipped with a risk aversion coefficient and construct their discounted payoff with the help of the exponential premium…
We consider a portfolio optimization problem in a defaultable market with finitely-many economical regimes, where the investor can dynamically allocate her wealth among a defaultable bond, a stock, and a money market account. The market…
We consider an investor with constant absolute risk aversion who trades a risky asset with general Ito dynamics, in the presence of small proportional transaction costs. Kallsen and Muhle-Karbe (2012) formally derived the leading-order…
This paper discusses a nonlinear integral equation arising from portfolio selection with a class of time-inconsistent preferences. We propose a unified framework requiring minimal assumptions, such as right-continuity of market coefficients…
Portfolio optimization is an important process in finance that consists in finding the optimal asset allocation that maximizes expected returns while minimizing risk. When assets are allocated in discrete units, this is a combinatorial…
We revisit optimal execution of an active portfolio in the presence of slippage (aka linear, proportional, or absolute-value) costs. Market efficiency implies a close balance between active alphas and trading costs, so even small changes to…
We propose a numerical recipe for risk evaluation defined by a backward stochastic differential equation. Using dual representation of the risk measure, we convert the risk valuation to a stochastic control problem where the control is a…
In this work, we study the optimal discretization error of stochastic integrals, in the context of the hedging error in a multidimensional It\^{o} model when the discrete rebalancing dates are stopping times. We investigate the convergence,…
In this paper, we revisit the portfolio allocation problem with designated risk-budget [Qian, 2005]. We generalize the problem of arbitrary risk budgets with unequal correlations to one that includes return forecasts and transaction costs…
This paper considers the optimal portfolio selection problem in a dynamic multi-period stochastic framework with regime switching. The risk preferences are of exponential (CARA) type with an absolute coefficient of risk aversion which…
Management of a portfolio that includes an illiquid asset is an important problem of modern mathematical finance. One of the ways to model illiquidity among others is to build an optimization problem and assume that one of the assets in a…
A novel procedure is presented for the objective comparison and evaluation of a bank's decision rules in optimising the timing of loan recovery. This procedure is based on finding a delinquency threshold at which the financial loss of a…