Related papers: Rebalance your portfolio without selling
This note provides a neat and enjoyable expansion and application of the magnificent Ordentlich-Cover theory of "universal portfolios." I generalize Cover's benchmark of the best constant-rebalanced portfolio (or 1-linear trading strategy)…
We study the bilateral trade problem: one seller, one buyer and a single, indivisible item for sale. It is well known that there is no fully-efficient and incentive compatible mechanism for this problem that maintains a balanced budget. We…
The main contribution of the paper is to employ the financial market network as a useful tool to improve the portfolio selection process, where nodes indicate securities and edges capture the dependence structure of the system. Three…
This paper considers the constrained portfolio optimization in a generalized life-cycle model. The individual with a stochastic income manages a portfolio consisting of stocks, a bond, and life insurance to maximize his or her consumption…
This paper considers a class of stochastic control problems with implicitly defined objective functions, which are the sources of time-inconsistency. We study the closed-loop equilibrium solutions in a general controlled diffusion…
We mathematically analyze a simple market model where trading at each point in time involves only two agents with the sum of their money being conserved and with neither parties resulting with negative money after the interaction process.…
A leveraged ETF is a fund aimed at achieving a rate of return several times greater than that of the underlying asset such as Nikkei 225 futures. Recently, it has been suggested that rebalancing trades of a leveraged ETF may destabilize the…
This paper considers the mean-reverting portfolio design problem arising from statistical arbitrage in the financial markets. We first propose a general problem formulation aimed at finding a portfolio of underlying component assets by…
In spite of the growing consideration for optimal execution in the financial mathematics literature, numerical approximations of optimal trading curves are almost never discussed. In this article, we present a numerical method to…
In this paper we consider the problem of minimising drawdown in a portfolio of financial assets. Here drawdown represents the relative opportunity cost of the single best missed trading opportunity over a specified time period. We formulate…
This paper provides a framework for modeling the financial system with multiple illiquid assets during a crisis. This work generalizes the paper by Amini, Filipovic and Minca (2016) by allowing for differing liquidation strategies. The main…
The paper investigates quadratic hedging in a semimartingale market that does not necessarily contain a risk-free asset. An equivalence result for hedging with and without numeraire change is established. This permits direct computation of…
In this short note, we will show how to optimize the portfolio of a large trader whose hedging strategy affects the price of his assets.
We relook at the classic equity fund selection and portfolio construction problems from a new perspective and propose an easy-to-implement framework to tackle the problem in practical investment. Rather than the conventional way by…
Integer variables allow the treatment of some portfolio optimization problems in a more realistic way and introduce the possibility of adding some natural features to the model. We propose an algebraic approach to maximize the expected…
We address the equilibrium concept of a reverse auction game so that no one can enhance the individual payoff by a unilateral change when all the others follow a certain strategy. In this approach the combinatorial possibilities to consider…
Changes in market conditions present challenges for investors as they cause performance to deviate from the ranges predicted by long-term averages of means and covariances. The aim of conditional asset allocation strategies is to overcome…
In this paper, motivated by the celebrated work of Kelly, we consider the problem of portfolio weight selection to maximize expected logarithmic growth. Going beyond existing literature, our focal point here is the rebalancing frequency…
We present a simulation-and-regression method for solving dynamic portfolio allocation problems in the presence of general transaction costs, liquidity costs and market impacts. This method extends the classical least squares Monte Carlo…
We consider a class of generalized capital asset pricing models in continuous time with a finite number of agents and tradable securities. The securities may not be sufficient to span all sources of uncertainty. If the agents have…