Related papers: Robust Asset-Liability Management
Motivated by recent axiomatic developments, we study the risk- and ambiguity-averse investment problem where trading takes place over a fixed finite horizon and terminal payoffs are evaluated according to a criterion defined in terms of a…
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…
The paper studies problem of continuous time optimal portfolio selection for a incom- plete market diffusion model. It is shown that, under some mild conditions, near optimal strategies for investors with different performance criteria can…
In this work we analytically solve an optimal retirement problem, in which the agent optimally allocates the risky investment, consumption and leisure rate to maximise a gain function characterised by a power utility function of consumption…
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…
We extend the classical mean-variance (MV) framework and propose a robust and sparse portfolio selection model incorporating an ellipsoidal uncertainty set to reduce the impact of estimation errors and fixed transaction costs to penalize…
Default risk calculus plays a crucial role in portfolio optimization when the risky asset is under threat of bankruptcy. However, traditional stochastic control techniques are not applicable in this scenario, and additional assumptions are…
We derive simple return models for several classes of bond portfolios. With only one or two risk factors our models are able to explain most of the return variations in portfolios of fixed rate government bonds, inflation linked government…
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…
Portfolio management is an essential component of investment strategy that aims to maximize returns while minimizing risk. This paper explores several portfolio management strategies, including asset allocation, diversification, active…
A {log-optimal} portfolio is any portfolio that maximizes the expected logarithmic growth (ELG) of an investor's wealth. This maximization problem typically assumes that the information of the true distribution of returns is known to the…
We discuss a class of risk-sensitive portfolio optimization problems. We consider the portfolio optimization model investigated by Nagai in 2003. The model by its nature can include fixed income securities as well in the portfolio. Under…
In this paper we study mean-variance hedging under the G-expectation framework. Our analysis is carried out by exploiting the G-martingale representation theorem and the related probabilistic tools, in a contin- uous financial market with…
This study presents an ANWSER model (asset network systemic risk model) to quantify the risk of financial contagion which manifests itself in a financial crisis. The transmission of financial distress is governed by a heterogeneous bank…
Excessive leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be…
Portfolio optimization is an important process in finance that consists in finding the optimal asset allocation that maximizes expected returns while minimizing risk. When assets are allocated in discrete units, this is a combinatorial…
In this paper we show how to implement in a simple way some complex real-life constraints on the portfolio optimization problem, so that it becomes amenable to quantum optimization algorithms. Specifically, first we explain how to obtain…
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…
This survey reviews portfolio selection problem for long-term horizon. We consider two objectives: (i) maximize the probability for outperforming a target growth rate of wealth process (ii) minimize the probability of falling below a target…
This paper assesses the hedge effectiveness of an index-based longevity swap and a longevity cap. Although swaps are a natural instrument for hedging longevity risk, derivatives with non-linear pay-offs, such as longevity caps, also provide…