Related papers: Schr\"{o}dinger Risk Diversification Portfolio
We revisit Markowitz's mean-variance portfolio selection model by considering a distributionally robust version, where the region of distributional uncertainty is around the empirical measure and the discrepancy between probability measures…
We study the problem of optimal long term portfolio selection with a view to beat a benchmark. Two kinds of objectives are considered. One concerns the probability of outperforming the benchmark and seeks either to minimise the decay rate…
We discuss the use of saddlepoint methods in the analysis of portfolios, with particular reference to credit portfolios. The objective is to proceed from a model of the loss distribution, given through probabilities, correlations and the…
Mean-reverting portfolios with volatility and sparsity constraints are of prime interest to practitioners in finance since they are both profitable and well-diversified, while also managing risk and minimizing transaction costs. Three main…
Estimating and assessing the risk of a large portfolio is an important topic in financial econometrics and risk management. The risk is often estimated by a substitution of a good estimator of the volatility matrix. However, the accuracy of…
We study mean-risk optimal portfolio problems where risk is measured by Recovery Average Value at Risk, a prominent example in the class of recovery risk measures. We establish existence results in the situation where the joint distribution…
Markowitz (1952, 1959) laid down the ground-breaking work on the mean-variance analysis. Under his framework, the theoretical optimal allocation vector can be very different from the estimated one for large portfolios due to the intrinsic…
We consider the issue of solution uniqueness for portfolio optimization problem and its inverse for asset returns with a finite number of possible scenarios. The risk is assessed by deviation measures introduced by [Rockafellar et al.,…
Modern portfolio theory(MPT) addresses the problem of determining the optimum allocation of investment resources among a set of candidate assets. In the original mean-variance approach of Markowitz, volatility is taken as a proxy for risk,…
Mean-variance portfolio decisions that combine prediction and optimisation have been shown to have poor empirical performance. Here, we consider the performance of various shrinkage methods by their efficient frontiers under different…
This paper investigates how to measure common market risk factors using newly proposed Panel Quantile Regression Model for Returns. By exploring the fact that volatility crosses all quantiles of the return distribution and using penalized…
Analytical, free of time consuming Monte Carlo simulations, framework for credit portfolio systematic risk metrics calculations is presented. Techniques are described that allow calculation of portfolio-level systematic risk measures…
Optimal capital allocation between different assets is an important financial problem, which is generally framed as the portfolio optimization problem. General models include the single-period and multi-period cases. The traditional…
The standard approach for constructing a Mean-Variance portfolio involves estimating parameters for the model using collected samples. However, since the distribution of future data may not resemble that of the training set, the…
In many stochastic problems, the output of interest depends on an input random vector mainly through a single random variable (or index) via an appropriate univariate transformation of the input. We exploit this feature by proposing an…
This paper proposes a robust, shocks-adaptive portfolio in a large-dimensional assets universe where the number of assets could be comparable to or even larger than the sample size. It is well documented that portfolios based on…
Diversification of an investment into independently fluctuating assets reduces its risk. In reality, movement of assets are are mutually correlated and therefore knowledge of cross--correlations among asset price movements are of great…
We propose post-screening portfolio selection (PS$^2$), a two-step framework for high-dimensional mean--variance investing. First, assets are screened by Lasso-type regression of a constant on excess returns without an intercept. Second,…
We provide analytical results for a static portfolio optimization problem with two coherent risk measures. The use of two risk measures is motivated by joint decision-making for portfolio selection where the risk perception of the portfolio…
The Diversification Quotient (DQ), introduced by Han et al. (2025), is a recently proposed measure of portfolio diversification that quantifies the reduction in a portfolio's risk-level parameter attributable to diversification. Grounded in…