Related papers: Robust Asset-Liability Management
Portfolio selection problems that optimize expected utility are usually difficult to solve. If the number of assets in the portfolio is large, such expected utility maximization problems become even harder to solve numerically. Therefore,…
We study a robust portfolio optimization problem under model uncertainty for an investor with logarithmic or power utility. The uncertainty is specified by a set of possible L\'evy triplets; that is, possible instantaneous drift, volatility…
What is the best market-neutral implementation of classical Equity Factors? Should one use the specific predictability of the short-leg to build a zero beta Long-Short portfolio, in spite of the specific costs associated to shorting, or is…
We propose a novel approach to infer investors' risk preferences from their portfolio choices, and then use the implied risk preferences to measure the efficiency of investment portfolios. We analyze a dataset spanning a period of six…
Portfolio optimization has been a central problem in finance, often approached with two steps: calibrating the parameters and then solving an optimization problem. Yet, the two-step procedure sometimes encounter the "error maximization"…
The comparative statics of the optimal portfolios across individuals is carried out for a continuous-time complete market model, where the risky assets price process follows a joint geometric Brownian motion with time-dependent and…
This paper solves a utility maximization problem under utility-based shortfall risk constraint, by proposing an approach using Lagrange multiplier and convex duality. Under mild conditions on the asymptotic elasticity of the utility…
We consider a utility-maximization problem in a general semimartingale financial model, subject to constraints on the number of shares held in each risky asset. These constraints are modeled by predictable convex-set-valued processes whose…
We study an optimal investment/consumption problem in a model capturing market and credit risk dependencies. Stochastic factors drive both the default intensity and the volatility of the stocks in the portfolio. We use the martingale…
In this work, we introduce Modern Portfolio Theory using basic concepts from linear algebra, differential calculus, statistics, and optimization. This theory allows us to measure the return and risk of an investment portfolio, serving as a…
We propose a risk measurement approach for a risk-averse stochastic problem. We provide results that guarantee that our problem has a solution. We characterize and explore the properties of the argmin as a risk measure and the minimum as a…
This paper investigates a continuous-time portfolio optimization problem with the following features: (i) a no-short selling constraint; (ii) a leverage constraint, that is, an upper limit for the sum of portfolio weights; and (iii) a…
In the presence of ambiguity on the driving force of market randomness, we consider the dynamic portfolio choice without any predetermined investment horizon. The investment criteria is formulated as a robust forward performance process,…
This paper describes a new method of bond portfolio optimization based on stochastic string models of correlation structure in bond returns. The paper shows how to approximate correlation function of bond returns, compute the optimal…
We introduce a financial portfolio optimization framework that allows us to automatically select the relevant assets and estimate their weights by relying on a sorted $\ell_1$-Norm penalization, henceforth SLOPE. Our approach is able to…
In this paper, we revisit the portfolio allocation problem with designated risk-budget [Qian, 2005]. We generalize the problem of arbitrary risk budgets with unequal correlations to one that includes return forecasts and transaction costs…
A discrete time probabilistic model, for optimal equity allocation and portfolio selection, is formulated so as to apply to (at least) reinsurance. In the context of a company with several portfolios (or subsidiaries), representing both…
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 characterizes the equilibrium in a continuous time financial market populated by heterogeneous agents who differ in their rate of relative risk aversion and face convex portfolio constraints. The model is studied in an…
We consider the mean--variance portfolio optimization problem under the game theoretic framework and without risk-free assets. The problem is solved semi-explicitly by applying the extended Hamilton--Jacobi--Bellman equation. Although the…