Related papers: Derivatives-based portfolio decisions. An expected…
This paper focuses on a dynamic multi-asset mean-variance portfolio selection problem under model uncertainty. We develop a continuous time framework for taking into account ambiguity aversion about both expected return rates and…
This paper studies the problem of maximizing expected utility from terminal wealth in a semi-static market composed of derivative securities, which we assume can be traded only at time zero, and of stocks, which can be traded continuously…
We investigate the problem of pricing and hedging derivatives of Electricity Futures contract when the underlying asset is not available. We propose to use a cross hedging strategy based on the Futures contract covering the larger delivery…
In complete markets, there are risky assets and a riskless asset. It is assumed that the riskless asset and the risky asset are traded continuously in time and that the market is frictionless. In this paper, we propose a new method for…
Diversification is usually viewed as a reliable way to reduce risk, yet it can dramatically fail for heavy-tailed losses with infinite mean: pooling independent losses of this type may increase tail risk at every threshold. We study this…
We investigate optimal consumption and investment problems for a Black-Scholes market under uniform restrictions on Value-at-Risk and Expected Shortfall. We formulate various utility maximization problems, which can be solved explicitly. We…
Portfolio managers often evaluate performance relative to benchmark, usually taken to be the Standard & Poor 500 stock index fund. This relative portfolio wealth is defined as the absolute portfolio wealth divided by wealth from investing…
The expanding number of assets offers more opportunities for investors but poses new challenges for modern portfolio management (PM). As a central plank of PM, portfolio selection by expected utility maximization (EUM) faces uncontrollable…
Models to price long term loans in the securities lending business are developed. These longer horizon deals can be viewed as contracts with optionality embedded in them. This insight leads to the usage of established methods from…
This paper develops and empirically evaluates a Sharpe-driven stock selection and liquidity-constrained portfolio optimization framework designed for the Chinese equity market. The proposed methodology integrates three sequential stages:…
In this paper, we search for optimal portfolio strategies in the presence of various risk measure that are common in financial applications. Particularly, we deal with the static optimization problem with respect to Value at Risk, Expected…
We consider a single-period portfolio selection problem for an investor, maximizing the expected ratio of the portfolio utility and the utility of a best asset taken in hindsight. The decision rules are based on the history of stock returns…
We present closed analytical approximations for the pricing of basket options, also applicable to Asian options with discrete averaging under the Black-Scholes model with time-dependent parameters. The formulae are obtained by using a…
This paper investigates the problem of ensembling multiple strategies for sequential portfolios to outperform individual strategies in terms of long-term wealth. Due to the uncertainty of strategies' performances in the future market, which…
Most decision theories, including expected utility theory, rank dependent utility theory and cumulative prospect theory, assume that investors are only interested in the distribution of returns and not in the states of the economy in which…
In this article we present new results for the pricing of arithmetic Asian options within a Black-Scholes context. To derive these results we make extensive use of the local scale invariance that exists in the theory of contingent claim…
We empirically test predictability on asset price by using stock selection rules based on maximum drawdown and its consecutive recovery. In various equity markets, monthly momentum- and weekly contrarian-style portfolios constructed from…
We study optimal investment in a financial market having a finite number of assets from a signal processing perspective. We investigate how an investor should distribute capital over these assets and when he should reallocate the…
The recent crisis and the following flight to simplicity put most derivative businesses around the world under considerable pressure. We argue that the traditional modeling techniques must be extended to include product design. We propose a…
This paper investigates a time-inconsistent portfolio selection problem in the incomplete mar ket model, integrating expected utility maximization with risk control. The objective functional balances the expected utility and variance on log…