Related papers: Portfolio Diversification Revisited
A quadratic discrete time probabilistic model, for optimal portfolio selection in (re-)insurance is studied. For positive values of underwriting levels, the expected value of the accumulated result is optimized, under constraints on its…
Financial markets change their behaviours abruptly. The mean, variance and correlation patterns of stocks can vary dramatically, triggered by fundamental changes in macroeconomic variables, policies or regulations. A trader needs to adapt…
In multi-state life insurance, an adequate balance between analytic tractability, computational efficiency, and statistical flexibility is of great importance. This might explain the popularity of Markov chain modelling, where matrix…
We determine rates of convergence of rank-based interacting diffusions and semimartingale reflecting Brownian motions to equilibrium. Convergence rate for the total variation metric is derived using Lyapunov functions. Sharp fluctuations of…
The present article explores the application of randomized control techniques in empirical asset pricing and performance evaluation. It introduces geometric random walks, a class of Markov chain Monte Carlo methods, to construct flexible…
We introduce and test an algorithm that adaptively estimates large deviation functions characterizing the fluctuations of additive functionals of Markov processes in the long-time limit. These functions play an important role for predicting…
The paper proposes a class of financial market models which are based on inhomogeneous telegraph processes and jump diffusions with alternating volatilities. It is assumed that the jumps occur when the tendencies and volatilities are…
This paper is mainly a survey of recent research developments regarding methods for risk minimization in financial markets modeled by It\^o-L\'evy processes, but it also contains some new results on the underlying stochastic maximum…
We explore a decomposition in which returns on a large class of portfolios relative to the market depend on a smooth non-negative drift and changes in the asset price distribution. This decomposition is obtained using general continuous…
This paper investigates portfolio selection within a continuous-time financial market with regime-switching and beliefs-dependent utilities. The market coefficients and the investor's utility function both depend on the market regime, which…
Datasets displaying temporal dependencies abound in science and engineering applications, with Markov models representing a simplified and popular view of the temporal dependence structure. In this paper, we consider Bayesian settings that…
In this work, we consider the optimal portfolio selection problem under hard constraints on trading volume amounts when the dynamics of the risky asset returns are governed by a discrete-time approximation of the Markov-modulated geometric…
We formulate a probabilistic Markov property in discrete time under a dynamic risk framework with minimal assumptions. This is useful for recursive solutions to risk-sensitive versions of dynamic optimisation problems such as optimal…
Many analyses of resource-allocation problems employ simplistic models of the population. Using the example of a resource-allocation problem of Marecek et al. [arXiv:1406.7639], we introduce rather a general behavioural model, where the…
In order to properly manage risk, practitioners must understand the aggregate risks they are exposed to. Additionally, to properly price policies and calculate bonuses the relative riskiness of individual business units must be well…
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…
In this study we suggest a portfolio selection framework based on option-implied information and multivariate non-Gaussian models. The proposed models incorporate skewness, kurtosis and more complex dependence structures among stocks…
We analyze the errors arising from discrete readjustment of the hedging portfolio when hedging options in exponential Levy models, and establish the rate at which the expected squared error goes to zero when the readjustment frequency…
The goal of this paper is to investigate how the marginal and dependence structures of a variety of multivariate L\'evy models affect calibration and pricing. To this aim, we study the approaches of Luciano and Semeraro (2010) and Ballotta…
Portfolio optimization has long been dominated by covariance-based strategies, such as the Markowitz Mean-Variance framework. However, these approaches often fail to ensure a balanced risk structure across assets, leading to concentration…