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Discrete time hedging in a complete diffusion market is considered. The hedge portfolio is rebalanced when the absolute difference between delta of the hedge portfolio and the derivative contract reaches a threshold level. The rate of…
This work extends a previous work in regime detection, which allowed trading positions to be profitably adjusted when a new regime was detected, to ex ante prediction of regimes, leading to substantial performance improvements over the…
We consider a dynamic portfolio optimization problem that incorporates predictable returns, instantaneous transaction costs, price impact, and stochastic volatility, extending the classical results of Garleanu and Pedersen (2013), which…
This paper considers consumption and portfolio optimization problems with recursive preferences in both infinite and finite time regions. Specially, the financial market consists of a risk-free asset and a risky asset that follows a general…
Optimal liquidation of an asset with unknown constant drift and stochastic regime-switching volatility is studied. The uncertainty about the drift is represented by an arbitrary probability distribution; the stochastic volatility is…
We study investment and insurance demand decisions for an agent in a theoretical continuous-time expected utility maximization model that combines risky assets with an (exogenous) insurable background risk. This risk takes the form of a…
We study the dynamic portfolio selection of an investor who uses deep learning methods to forecast stock market excess returns. In a two-asset allocation problem, deep neural networks -- both feedforward and long short-term memory (LSTM)…
We consider an insurance company whose surplus is represented by the classical Cramer-Lundberg process. The company can invest its surplus in a risk free asset and in a risky asset, governed by the Black-Scholes equation. There is a…
We investigate the optimal strategy over a finite time horizon for a portfolio of stock and bond and a derivative in an multiplicative Markovian market model with transaction costs (friction). The optimization problem is solved by a…
This paper presents several models addressing optimal portfolio choice, optimal portfolio liquidation, and optimal portfolio transition issues, in which the expected returns of risky assets are unknown. Our approach is based on a coupling…
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 studies the equity holders' mean-variance optimal portfolio choice problem for (non-)protected participating life insurance contracts. We derive explicit formulas for the optimal terminal wealth and the optimal strategy in the…
Index tracking is a popular form of asset management. Typically, a quadratic function is used to define the tracking error of a portfolio and the look back approach is applied to solve the index tracking problem. We argue that a forward…
This paper proposes a new method for financial portfolio optimization based on reducing simultaneous asset shocks across a collection of assets. This may be understood as an alternative approach to risk reduction in a portfolio based on a…
Optimal capital allocation between different assets is an important financial problem, which is generally framed as the portfolio optimization problem. General models include the single-period and multi-period cases. The traditional…
This paper investigates portfolio selection within a continuous-time financial market with regime-switching and beliefs-dependent utilities. The market coefficients and the investor's utility function both depend on the market regime, which…
This paper extends the tactical asset allocation literature by incorporating regime modeling using techniques from machine learning. We propose a novel model that classifies current regimes, forecasts the distribution of future regimes, and…
Traditional risk-adjusted returns, such as the Treynor, Sharpe, Sortino, and Information ratios, have been pivotal in portfolio asset allocation, focusing on minimizing risk while maximizing profit. Nevertheless, these metrics often fail to…
Following Boukai (2021) we present the Generalized Gamma (GG) distribution as a possible RND for modeling European options prices under Heston's (1993) stochastic volatility (SV) model. This distribution is seen as especially useful in…
This paper first describes a class of uncertain stochastic control systems with Markovian switching, and derives an It\^o-Liu formula for Markov-modulated processes. And we characterize an optimal control law, which satisfies the…