Related papers: Mind the Cap! -- Constrained Portfolio Optimisatio…

The aim of this paper is to study the fast computation of the lower and upper bounds on the value function for utility maximization under the Heston stochastic volatility model with general utility functions. It is well known there is a…

This paper explores option portfolio optimization when the underlying returns are skew-elliptical t-distributed. We use the variance and value at risk (VaR) to measure portfolio risk. The novelty of our work is the departure from the…

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…

We propose a multi-scale stochastic volatility model in which a fast mean-reverting factor of volatility is built on top of the Heston stochastic volatility model. A singular pertubative expansion is then used to obtain an approximation for…

This paper studies dynamic asset allocation with interest rate risk and several sources of ambiguity. The market consists of a risk-free asset, a zero-coupon bond (both determined by a Vasicek model), and a stock. There is ambiguity about…

Robust optimization methods have shown practical advantages in a wide range of decision-making applications under uncertainty. Recently, their efficacy has been extended to multi-period settings. Current approaches model uncertainty either…

In this paper, we study an intertemporal utility maximization problem in which an investor chooses consumption and portfolio strategies in the presence of a stochastic factor and a no-borrowing constraint. In the spirit of the Kim-Omberg…

We derive a closed form portfolio optimization rule for an investor who is diffident about mean return and volatility estimates, and has a CRRA utility. The novelty is that confidence is here represented using ellipsoidal uncertainty sets…

The minimum (worst case) value of a long-only portfolio of bonds, over a convex set of yield curves and spreads, can be estimated by its sensitivities to the points on the yield curve. We show that sensitivity based estimates are…

Motivated by practical applications, we explore the constrained multi-period mean-variance portfolio selection problem within a market characterized by a dynamic factor model. This model captures predictability in asset returns driven by…

Computational aspects of the optimal consumption and investment with the partially observed stochastic volatility of the asset prices are considered. The new quantization approach to filtering - density quantization - is introduced which…

We consider an agent who has access to a financial market, including derivative contracts, who looks to maximise her utility. Whilst the agent looks to maximise utility over one probability measure, or class of probability measures, she…

The Heston stochastic volatility model is arguably, the most popular stochastic volatility model used to price and risk manage exotic derivatives. In spite of this, it is not necessarily easy to calibrate to the market and obtain stable…

This paper discusses the sensitivity of the long-term expected utility of optimal portfolios for an investor with constant relative risk aversion. Under an incomplete market given by a factor model, we consider the utility maximization…

We consider the problem of the statistical uncertainty of the correlation matrix in the optimization of a financial portfolio. We show that the use of clustering algorithms can improve the reliability of the portfolio in terms of the ratio…

This work initiates research into the problem of determining an optimal investment strategy for investors with different attitudes towards the trade-offs of risk and profit. The probability distribution of the return values of the stocks…

A new methodology has been introduced to clean the correlation matrix of single stocks returns based on a constrained principal component analysis using financial data. Portfolios were introduced, namely "Fundamental Maximum Variance…

We propose a new approach to portfolio optimization that utilizes a unique combination of synthetic data generation and a CVaR-constraint. We formulate the portfolio optimization problem as an asset allocation problem in which each asset…

When the planning horizon is long, and the safe asset grows indefinitely, isoelastic portfolios are nearly optimal for investors who are close to isoelastic for high wealth, and not too risk averse for low wealth. We prove this result in a…

The aim of this paper is to solve an optimal investment, consumption and life insurance problem when the investor is restricted to capital guarantee. We consider an incomplete market described by a jump-diffusion model with stochastic…