Related papers: A return-diversification approach to portfolio sel…
As the cornerstone of modern portfolio theory, Markowitz's mean-variance optimization is considered a major model adopted in portfolio management. However, due to the difficulty of estimating its parameters, it cannot be applied to all…
We study the problem of optimal long term portfolio selection with a view to beat a benchmark. Two kinds of objectives are considered. One concerns the probability of outperforming the benchmark and seeks either to minimise the decay rate…
We consider an investor, whose portfolio consists of a single risky asset and a risk free asset, who wants to maximize his expected utility of the portfolio subject to managing the Value at Risk (VaR) assuming a heavy tailed distribution of…
In this paper, we propose an innovative investment framework incorporating asset allocation and class diversification oriented specifically for the biotechnology industry. With growing interests and capitalization in multiple biotech…
In behavioral finance, aversion affects investors' judgment of future uncertainty when profit and loss occur. Considering investors' aversion to loss and risk, and the ambiguous uncertainty characterizing asset returns, we construct a…
We develop a deep reinforcement learning framework for dynamic portfolio optimization that combines a Dirichlet policy with cross-sectional attention mechanisms. The Dirichlet formulation ensures that portfolio weights are always feasible,…
Online portfolio selection is an integral componentof wealth management. The fundamental undertaking is tomaximise returns while minimising risk given investor con-straints. We aim to examine and improve modern strategiesto generate higher…
In this paper we present an evolutionary optimization approach to solve the risk parity portfolio selection problem. While there exist convex optimization approaches to solve this problem when long-only portfolios are considered, the…
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…
We propose a method for extending a given asset pricing formula to account for two additional sources of risk: the risk associated with future changes in market--calibrated parameters and the remaining risk associated with idiosyncratic…
Understanding the dependencies among financial assets is critical for portfolio optimization. Traditional approaches based on correlation networks often fail to capture the nonlinear and directional relationships that exist in financial…
This paper presents how the most recent improvements made on covariance matrix estimation and model order selection can be applied to the portfolio optimisation problem. The particular case of the Maximum Variety Portfolio is treated but…
Energy markets are strategic to governments and economic development. Several commodities compete as substitutable energy sources and energy diversifiers. Such competition reduces the energy vulnerability of countries as well as portfolios'…
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…
Estimating the covariance of asset returns, i.e., the risk model, is a key component of financial portfolio construction and evaluation. Most risk modeling approaches produce a factor model that decomposes the asset variability into two…
Risk diversification is the basis of insurance and investment. It is thus crucial to study the effects that could limit it. One of them is the existence of systemic risk that affects all the policies at the same time. We introduce here a…
We develop the idea of using Monte Carlo sampling of random portfolios to solve portfolio investment problems. In this first paper we explore the need for more general optimization tools, and consider the means by which constrained random…
In this paper we consider a generalization of the Markowitz's Mean-Variance model under linear transaction costs and cardinality constraints. The cardinality constraints are used to limit the number of assets in the optimal portfolio. The…
We propose a pairs trading model that incorporates a time-varying volatility of the Constant Elasticity of Variance type. Our approach is based on stochastic control techniques; given a fixed time horizon and a portfolio of two…
In this paper, we implement and evaluate a conditional diffusion model for asset return prediction and portfolio construction on large-scale equity data. Our method models the full distribution of future returns conditioned on firm…