Related papers: Portfolio Diversification Revisited
We present a unified approach to get explicit formulas for utility maximising strategies in Exponential Levy models. This approach is related to $f$-divergence minimal martingale measures and based on a new concept of preservation of the…
This paper studies the time-varying structure of the equity market with respect to market capitalization. First, we analyze the distribution of the 100 largest companies' market capitalizations over time, in terms of inequality,…
Portfolio optimization is a critical task in investment. Most existing portfolio optimization methods require information on the distribution of returns of the assets that make up the portfolio. However, such distribution information is…
Portfolio optimization approaches inevitably rely on multivariate modeling of markets and the economy. In this paper, we address three sources of error related to the modeling of these complex systems: 1. oversimplifying hypothesis; 2.…
We cast episodic Markov decision process (MDP) planning as Bayesian inference over policies. A policy is treated as the latent variable and is assigned an unnormalized probability of optimality that is monotone in its expected return,…
Time-reversal symmetry of microscopic laws dictates that the equilibrium distribution of a stochastic process must obey the detailed balance. On the other hand, cyclic Markov processes that do not admit equilibrium distributions with…
We consider the problem of maximizing the asymptotic growth rate of an investor under drift uncertainty in the setting of stochastic portfolio theory (SPT). As in the work of Kardaras and Robertson we take as inputs (i) a Markovian…
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…
Among professionals and academics alike, it is well known that active portfolio management is unable to provide additional risk-adjusted returns relative to their benchmarks. For this reason, passive wealth management has emerged in recent…
We explore a stochastic model that enables capturing external influences in two specific ways. The model allows for the expression of uncertainty in the parametrisation of the stochastic dynamics and incorporates patterns to account for…
Robust optimization provides a principled framework for decision-making under uncertainty, with broad applications in finance, engineering, and operations research. In portfolio optimization, uncertainty in expected returns and covariances…
In this paper, we establish a probabilistic representation as well as some integration by parts formulae for the marginal law at a given time maturity of some stochastic volatility model with unbounded drift. Relying on a perturbation…
We present a method for constructing the log-optimal portfolio using the well-calibrated forecasts of market values. Dawid's notion of calibration and the Blackwell approachability theorem are used for computing well-calibrated forecasts.…
This paper re-examines the problem of estimating risk premia in linear factor pricing models. Typically, the data used in the empirical literature are characterized by weakness of some pricing factors, strong cross-sectional dependence in…
For stochastic approximation algorithms with discontinuous dynamics, it is shown that under suitable distributional assumptions, the interpolated iterates track a Fillipov solution of the limiting differential inclusion. In addition, we…
This note discusses some of the aspects of a model for the covariance of equity returns based on a simple "isotropic" structure in which all pairwise correlations are taken to be the same value. The effect of the structure on feasible…
We consider the problem of defining and fitting models of autoregressive time series of probability distributions on a compact interval of $\mathbb{R}$. An order-$1$ autoregressive model in this context is to be understood as a Markov…
We develop a methodology for index tracking and risk exposure control using financial derivatives. Under a continuous-time diffusion framework for price evolution, we present a pathwise approach to construct dynamic portfolios of…
In this paper, the weak convergence of impulsive recurrent process with Markov switching in the scheme of Levy approximation is proved. For the relative compactness, a method proposed by R. Liptser for semimartingales is used with a…
This paper discusses the problem of adaptive estimation of a univariate object like the value of a regression function at a given point or a linear functional in a linear inverse problem. We consider an adaptive procedure originated from…