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We investigate optimal consumption policies in the liquidity risk model introduced in Pham and Tankov (2007). Our main result is to derive smoothness results for the value functions of the portfolio/consumption choice problem. As an…
We consider the problem of minimizing capital at risk in the Black-Scholes setting. The portfolio problem is studied given the possibility that a correlation constraint between the portfolio and a financial index is imposed. The optimal…
Statistical arbitrage methods identify mispricings in securities with the goal of building portfolios which are weakly correlated with the market. In pairs trading, an arbitrage opportunity is identified by observing relative price…
We consider an optimal consumption/investment problem to maximize expected utility from consumption. In this market model, the investor is allowed to choose a portfolio which consists of one bond, one liquid risky asset (no transaction…
We revisit the problem of portfolio selection, where an investor maximizes utility subject to a risk constraint. Our framework is very general and accommodates a wide range of utility and risk functionals, including non-concave utilities…
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…
Cryptocurrencies (CCs) have risen rapidly in market capitalization over the last years. Despite striking price volatility, their high average returns have drawn attention to CCs as alternative investment assets for portfolio and risk…
We study an optimization problem for a portfolio with a risk-free, a liquid, and an illiquid risky asset. The illiquid risky asset is sold in an exogenous random moment with a prescribed liquidation time distribution. The investor prefers a…
Portfolio optimisation is essential in quantitative investing, but its implementation faces several practical difficulties. One particular challenge is converting optimal portfolio weights into real-life trades in the presence of realistic…
This work extends a previous work in regime detection, which allowed trading positions to be profitably adjusted when a new regime was detected, to ex ante prediction of regimes, leading to substantial performance improvements over the…
We consider portfolio optimization under a preference model in a single-period, complete market. This preference model includes Yaari's dual theory of choice and quantile maximization as special cases. We characterize when the optimal…
We propose a universal end-to-end framework for portfolio optimization where asset distributions are directly obtained. The designed framework circumvents the traditional forecasting step and avoids the estimation of the covariance matrix,…
Understanding the dependencies among financial assets is critical for portfolio optimization. Traditional approaches based on correlation networks often fail to capture the nonlinear and directional relationships that exist in financial…
We study a Black-Scholes market with a finite time horizon and two investors: an honest and an insider trader. We analyze it with anticipating stochastic calculus in two steps. First, we recover the classical result on portfolio…
The choice of admissible trading strategies in mathematical modelling of financial markets is a delicate issue, going back to Harrison and Kreps (1979). In the context of optimal portfolio selection with expected utility preferences this…
We present a unified, market-complete model that integrates both the Bachelier and Black-Scholes-Merton frameworks for asset pricing. The model allows for the study, within a unified framework, of asset pricing in a natural world that…
We present an explicit hedging strategy, which enables to prove arbitrageness of market incorporating at least two assets depending on the same random factor. The implied Black-Scholes volatility, computed taking into account the form of…
In this paper, we construct a solution to the optimal contract problem for delegated portfolio management of the fist-best (risk-sharing) type. The novelty of our result is (i) in the robustness of the optimal contract with respect to…
The problem of portfolio optimization is one of the most important issues in asset management. This paper proposes a new dynamic portfolio strategy based on the time-varying structures of MST networks in Chinese stock markets, where the…
We consider portfolio optimization in futures markets. We model the entire futures price curve at once as a solution of a stochastic partial differential equation. The agents objective is to maximize her utility from the final wealth when…