Related papers: Portfolio Diversification Revisited
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…
We present an optimal control approach to the problem of model calibration for L\'evy processes based on a non parametric estimation procedure. The calibration problem is of considerable interest in mathematical finance and beyond.…
Multivariate Distributions are needed to capture the correlation structure of complex systems. In previous works, we developed a Random Matrix Model for such correlated multivariate joint probability density functions that accounts for the…
This study considers an optimal reinsurance, investment, and dividend strategy control problem for insurance companies in a regulated Markov regime-switching environment, intending to maximize long-run average reward. Unlike existing single…
Growth-optimal portfolios are guaranteed to accumulate higher wealth than any other investment strategy in the long run. However, they tend to be risky in the short term. For serially uncorrelated markets, similar portfolios with more…
In this paper we aim to improve existing empirical exchange rate models by accounting for uncertainty with respect to the underlying structural representation. Within a flexible Bayesian non-linear time series framework, our modeling…
A method for calculating multi-portfolio time consistent multivariate risk measures in discrete time is presented. Market models for $d$ assets with transaction costs or illiquidity and possible trading constraints are considered on a…
We consider an investor, whose portfolio consists of a single risky asset and a risk free asset, who wants to maximize his expected utility of the portfolio subject to the Value at Risk assuming a heavy tail distribution of the stock prices…
In the regime switching extension of Black-Scholes-Merton model of asset price dynamics, one assumes that the volatility coefficient evolves as a hidden pure jump process. Under the assumption of Markov regime switching, we have considered…
The field of portfolio selection is an active research topic, which combines elements and methodologies from various fields, such as optimization, decision analysis, risk management, data science, forecasting, etc. The modeling and…
Portfolio optimization is a financial task which requires the allocation of capital on a set of financial assets to achieve a better trade-off between return and risk. To solve this problem, recent studies applied multi-objective…
We develop a framework for convexifying a fairly general class of optimization problems. Under additional assumptions, we analyze the suboptimality of the solution to the convexified problem relative to the original nonconvex problem and…
In this paper we seek to demonstrate the predictability of stock market returns and explain the nature of this return predictability. To this end, we introduce investors with different investment horizons into the news-driven, analytic,…
Motivated by many application problems, we consider Markov decision processes (MDPs) with a general loss function and unknown parameters. To mitigate the epistemic uncertainty associated with unknown parameters, we take a Bayesian approach…
We consider an investor who seeks to maximize her expected utility derived from her terminal wealth relative to the maximum performance achieved over a fixed time horizon, and under a portfolio drawdown constraint, in a market with local…
Beta-sorted portfolios -- portfolios comprised of assets with similar covariation to selected risk factors -- are a popular tool in empirical finance to analyze models of (conditional) expected returns. Despite their widespread use, little…
This work is devoted to the almost sure stabilization of adaptive control systems that involve an unknown Markov chain. The control system displays continuous dynamics represented by differential equations and discrete events given by a…
We propose a definition of diversification as a binary relationship between financial portfolios. According to it, a convex linear combination of several risk positions with some weights is considered to be less risky than the probabilistic…
We consider general Markov processes with absorption and provide criteria ensuring the exponential convergence in total variation of the distribution of the process conditioned not to be absorbed. The first one is based on two-sided…
Measuring model risk is required by regulators on financial and insurance markets. We separate model risk into parameter estimation risk and model specification risk, and we propose expected shortfall type model risk measures applied to…