Related papers: Risk Budgeting Portfolios: Existence and Computati…
Portfolio optimization is a task that investors use to determine the best allocations for their investments, and fund managers implement computational models to help guide their decisions. While one of the most common portfolio optimization…
A new framework for portfolio diversification is introduced which goes beyond the classical mean-variance approach and portfolio allocation strategies such as risk parity. It is based on a novel concept called portfolio dimensionality that…
This paper introduces and examines numerical approximation schemes for computing risk budgeting portfolios associated to positive homogeneous and sub-additive risk measures. We employ Mirror Descent algorithms to determine the optimal risk…
Risk contributions of portfolios form an indispensable part of risk adjusted performance measurement. The risk contribution of a portfolio, e.g., in the Euler or Aumann-Shapley framework, is given by the partial derivatives of a risk…
Entropy based ideas find wide-ranging applications in finance for calibrating models of portfolio risk as well as options pricing. The abstracted problem, extensively studied in the literature, corresponds to finding a probability measure…
We introduce a universal framework for mean-covariance robust risk measurement and portfolio optimization. We model uncertainty in terms of the Gelbrich distance on the mean-covariance space, along with prior structural information about…
Classical mean-variance portfolio theory tells us how to construct a portfolio of assets which has the greatest expected return for a given level of return volatility. Utility theory then allows an investor to choose the point along this…
In portfolio optimization, decision makers face difficulties from uncertainties inherent in real-world scenarios. These uncertainties significantly influence portfolio outcomes in both classical and multi-objective Markowitz models. To…
This paper explores the practical approach to portfolio selection methods for investments. The study delves into portfolio theory, discussing concepts such as expected return, variance, asset correlation, and opportunity sets. It also…
Portfolio diversification is one of the most effective ways to minimize investment risk. Individuals and fund managers aim to create a portfolio of assets that not only have high returns but are also uncorrelated. This goal can be achieved…
This paper introduces a software component created in Visual Basic for Applications (VBA) that can be applied for creating an optimal portfolio using two different methods. The first method is the seminal approach of Markowitz that is based…
The conventional wisdom of mean-variance (MV) portfolio theory asserts that the nature of the relationship between risk and diversification is a decreasing asymptotic function, with the asymptote approximating the level of portfolio…
We study the design of portfolios under a minimum risk criterion. The performance of the optimized portfolio relies on the accuracy of the estimated covariance matrix of the portfolio asset returns. For large portfolios, the number of…
Finding an optimal balance between risk and returns in investment portfolios is a central challenge in quantitative finance, often addressed through Markowitz portfolio theory (MPT). While traditional portfolio optimization is carried out…
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…
Managing investment portfolios is an old and well know problem in multiple fields including financial mathematics and financial engineering as well as econometrics and econophysics. Multiple different concepts and theories were used so far…
This paper proposes a new method for financial portfolio optimization based on reducing simultaneous asset shocks across a collection of assets. This may be understood as an alternative approach to risk reduction in a portfolio based on a…
This work proposes a unified framework for portfolio allocation, covering both asset selection and optimization, based on a multiple-hypothesis predict-then-optimize approach. The portfolio is modeled as a structured ensemble, where each…
This paper studies a continuous-time market where an agent, having specified an investment horizon and a targeted terminal mean return, seeks to minimize the variance of the return. The optimal portfolio of such a problem is called…
Designing an optimum portfolio for allocating suitable weights to its constituent assets so that the return and risk associated with the portfolio are optimized is a computationally hard problem. The seminal work of Markowitz that attempted…