Related papers: Optimal portfolio allocation with uncertain covari…
This paper discusses a nonlinear integral equation arising from portfolio selection with a class of time-inconsistent preferences. We propose a unified framework requiring minimal assumptions, such as right-continuity of market coefficients…
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…
Factor analysis (FA) or principal component analysis (PCA) models the covariance matrix of the observed data as R = SS' + {\Sigma}, where SS' is the low-rank covariance matrix of the factors (aka latent variables) and {\Sigma} is the…
This paper addresses the estimation of the systemic risk measure known as CoVaR, which quantifies the risk of a financial portfolio conditional on another portfolio being at risk. We identify two principal challenges: conditioning on a…
Minimum-variance portfolio optimizations rely on accurate covariance estimator to obtain optimal portfolios. However, it usually suffers from large error from sample covariance matrix when the sample size $n$ is not significantly larger…
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…
We propose an iterative gradient-based algorithm to efficiently solve the portfolio selection problem with multiple spectral risk constraints. Since the conditional value at risk (CVaR) is a special case of the spectral risk measure, our…
This paper addresses risk averse constrained optimization problems where the objective and constraint functions can only be computed by a blackbox subject to unknown uncertainties. To handle mixed aleatory/epistemic uncertainties, the…
In this paper, we propose the multivariate range Value-at-Risk (MRVaR) and the multivariate range covariance (MRCov) as two risk measures and explore their desirable properties in risk management. In particular, we explain that such…
In economics, insurance and finance, value at risk (VaR) is a widely used measure of the risk of loss on a specific portfolio of financial assets. For a given portfolio, time horizon, and probability $\alpha$, the $100\alpha\%$ VaR is…
In these notes we discuss investment allocation to multiple alpha streams traded on the same execution platform, including when trades are crossed internally resulting in turnover reduction. We discuss approaches to alpha weight…
Beta-sorted portfolios -- portfolios comprised of assets with similar covariation to selected risk factors -- are a popular tool in empirical finance to analyze models of (conditional) expected returns. Despite their widespread use, little…
This paper presents an optimal allocation problem in a financial market with one risk-free and one risky asset, when the market is driven by a stochastic market price of risk. We solve the problem in continuous time, for an investor with a…
This article studies and solves the problem of optimal portfolio allocation with CV@R penalty when dealing with imperfectly simulated financial assets. We use a Stochastic biased Mirror Descent to find optimal resource allocation for a…
This paper offers a precise analytical characterization of the distribution of returns for a portfolio constituted of assets whose returns are described by an arbitrary joint multivariate distribution. In this goal, we introduce a…
This paper investigates the investment behaviour of a large unregulated financial institution (FI) with CARA risk preferences. It shows how the FI optimizes its trading to account for market illiquidity using an extension of the…
We consider the problem of mean-variance portfolio optimization for a generic covariance matrix subject to the budget constraint and the constraint for the expected return, with the application of the replica method borrowed from the…
The comovement phenomenon in financial markets creates decision scenarios with positively correlated asset returns. This paper addresses covariance matrix estimation under such conditions, motivated by observations of significant positive…
We introduce performance-based regularization (PBR), a new approach to addressing estimation risk in data-driven optimization, to mean-CVaR portfolio optimization. We assume the available log-return data is iid, and detail the approach for…
We extend the Annually Recalculated Virtual Annuity (ARVA) spending rule for retirement savings decumulation to include a cap and a floor on withdrawals. With a minimum withdrawal constraint, the ARVA strategy runs the risk of depleting the…