Related papers: Portfolio Optimization Rules beyond the Mean-Varia…
Empirical studies indicate the existence of long range dependence in the volatility of the underlying asset. This feature can be captured by modeling its return and volatility using functions of a stationary fractional Ornstein--Uhlenbeck…
The paper solves the problem of optimal portfolio choice when the parameters of the asset returns distribution, like the mean vector and the covariance matrix are unknown and have to be estimated by using historical data of the asset…
We study an optimization-based approach to con- struct a mean-reverting portfolio of assets. Our objectives are threefold: (1) design a portfolio that is well-represented by an Ornstein-Uhlenbeck process with parameters estimated by maximum…
This work derives an approximate analytical single period solution of the portfolio choice problem for the power utility function. It is possible to do so if we consider that the asset returns follow a multivariate normal distribution. It…
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…
We consider an expected utility maximization problem where the utility function is not necessarily concave and the time horizon is uncertain. We establish a necessary and sufficient condition for the optimality for general non-concave…
Attempts to allocate capital across a selection of different investments are often hampered by the fact that investors' decisions are made under limited information (no historical return data) and during an extremely limited timeframe.…
Recent advances in quantum hardware offer new approaches to solve various optimization problems that can be computationally expensive when classical algorithms are employed. We propose a hybrid quantum-classical algorithm to solve a dynamic…
This paper proposes a portfolio construction framework designed to remain robust under estimation error, non-stationarity, and realistic trading constraints. The methodology combines dynamic asset eligibility, deterministic rebalancing, and…
Risk control and optimal diversification constitute a major focus in the finance and insurance industries as well as, more or less consciously, in our everyday life. We present a discussion of the characterization of risks and of the…
The mean and variance of portfolio returns are the standard quantities to measure the expected return and risk of a portfolio. Efficient portfolios that provide optimal trade-offs between mean and variance warrant consideration. To express…
In the present paper, we derive a closed-form solution of the multi-period portfolio choice problem for a quadratic utility function with and without a riskless asset. All results are derived under weak conditions on the asset returns. No…
We consider a multi-stock continuous time incomplete market model with random coefficients. We study the investment problem in the class of strategies which do not use direct observations of the appreciation rates of the stocks, but rather…
We consider the problem of mean-variance portfolio optimization for a generic covariance matrix subject to the budget constraint and the constraint for the expected return, with the application of the replica method borrowed from the…
This paper describes the dependence of market-based statistical moments of returns on statistical moments and correlations of the current and past trade values. We use Markowitz's definition of value weighted return of a portfolio as the…
The growing interest in cryptocurrencies has drawn the attention of the financial world to this innovative medium of exchange. This study aims to explore the impact of cryptocurrencies on portfolio performance. We conduct our analysis…
We propose an alternative linearization to the classical Markowitz quadratic portfolio optimization model, based on maximum drawdown. This model, which minimizes maximum portfolio drawdown, is particularly appealing during times of…
In this paper, we propose a new class of optimization problems, which maximize the terminal wealth and accumulated consumption utility subject to a mean variance criterion controlling the final risk of the portfolio. The multiple-objective…
We extend and test empirically the multifractal model of asset returns based on a multiplicative cascade of volatilities from large to small time scales. The multifractal description of asset fluctuations is generalized into a multivariate…
In this paper, both dynamic mean-variance portfolio selection problems and dynamic variance hedging problems are discussed under non-Markovian framework. Explicit closed-loop equilibrium strategies of these problems are respectively…