Related papers: When to efficiently rebalance a portfolio
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…
Given multivariate time series, we study the problem of forming portfolios with maximum mean reversion while constraining the number of assets in these portfolios. We show that it can be formulated as a sparse canonical correlation analysis…
We study the optimal portfolio liquidation problem over a finite horizon in a limit order book with bid-ask spread and temporary market price impact penalizing speedy execution trades. We use a continuous-time modeling framework, but in…
In the seminal paper on optimal execution of portfolio transactions, Almgren and Chriss (2001) define the optimal trading strategy to liquidate a fixed volume of a single security under price uncertainty. Yet there exist situations, such as…
Smart beta, also known as strategic beta or factor investing, is the idea of selecting an investment portfolio in a simple rule-based manner that systematically captures market inefficiencies, thereby enhancing risk-adjusted returns above…
Existence of stochastic financial equilibria giving rise to semimartingale asset prices is established under a general class of assumptions. These equilibria are expressed in real terms and span complete markets or markets with withdrawal…
Robust optimization provides a principled framework for decision-making under uncertainty, with broad applications in finance, engineering, and operations research. In portfolio optimization, uncertainty in expected returns and covariances…
Distributed optimization for resource allocation problems is investigated and a sub-optimal continuous-time algorithm is proposed. Our algorithm has lower order dynamics than others to reduce burdens of computation and communication, and is…
In this paper, we consider the optimal portfolio liquidation problem under the dynamic mean-variance criterion and derive time-consistent solutions in three important models. We give adapted optimal strategies under a reconsidered…
This paper considers the portfolio management problem of optimal investment, consumption and life insurance. We are concerned with time inconsistency of optimal strategies. Natural assumptions, like different discount rates for consumption…
We consider a stock that follows a geometric Brownian motion (GBM) and a riskless asset continuously compounded at a constant rate. We assume that the stock can go bankrupt, i.e., lose all of its value, at some exogenous random time…
This article develops the theory of risk budgeting portfolios, when we would like to impose weight constraints. It appears that the mathematical problem is more complex than the traditional risk budgeting problem. The formulation of the…
\begin{abstract} In this paper, we integrated the statistical arbitrage strategy, pairs trading, into the Black-Litterman model and constructed efficient mean-variance portfolios. Typically, pairs trading underperforms under volatile or…
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…
We propose an alternative approach towards cost mitigation in volatility-managed portfolios based on smoothing the predictive density of an otherwise standard stochastic volatility model. Specifically, we develop a novel variational Bayes…
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…
We consider the problem of portfolio selection within the classical Markowitz mean-variance framework, reformulated as a constrained least-squares regression problem. We propose to add to the objective function a penalty proportional to the…
This paper is concerned with portfolio optimization models for creating high-quality lists of recommended items to balance the accuracy and diversity of recommendations. However, the statistics (i.e., expectation and covariance of ratings)…
We construct a diffusion approximation of a repeated game in which agents make bets on outcomes of i.i.d. random vectors and their strategies are close to an asymptotically optimal strategy. This model can be interpreted as trading in an…
We model the impact costs of a strategy that trades a basket of correlated instruments, by extending to the multivariate case the linear propagator model previously used for single instruments. Our specification allows us to calibrate a…