Related papers: A Portfolio's Common Causal Conditional Risk-neutr…
We consider Constant Proportion Portfolio Insurance (CPPI) and its dynamic extension, which may be called Dynamic Proportion Portfolio Insurance (DPPI). It is shown that these investment strategies work within the setting of F\"ollmer's…
We study the expected utility portfolio optimization problem in an incomplete financial market where the risky asset dynamics depend on stochastic factors and the portfolio allocation is constrained to lie within a given convex set. We…
Growth-optimal portfolios are guaranteed to accumulate higher wealth than any other investment strategy in the long run. However, they tend to be risky in the short term. For serially uncorrelated markets, similar portfolios with more…
In this paper we assume a multivariate risk model has been developed for a portfolio and its capital derived as a homogeneous risk measure. The Euler (or gradient) principle, then, states that the capital to be allocated to each component…
In this paper, we discuss the ambiguous chance constrained based portfolio optimization problems, in which the perturbations associated with the input parameters are stochastic in nature, but their distributions are not known precisely. We…
The estimation of dependencies between multiple variables is a central problem in the analysis of financial time series. A common approach is to express these dependencies in terms of a copula function. Typically the copula function is…
We study relaxed stochastic control problems where the state equation is a one dimensional linear stochastic differential equation with random and unbounded coefficients. The two main results are existence of an optimal relaxed control and…
Accurately estimating risk measures for financial portfolios is critical for both financial institutions and regulators. However, many existing models operate at the aggregate portfolio level and thus fail to capture the complex…
This paper presents an approach for the modelling of dependent random variables using generalised polynomial chaos. This allows to write chance-constrained optimization problems with respect to a joint distribution modelling dependencies…
Conditional copulas are flexible statistical tools that couple joint conditional and marginal conditional distributions. In a linear regression setting with more than one covariate and two dependent outcomes, we propose the use of additive…
This article deals with the problem of optimal allocation of capital to corporate bonds in fixed income portfolios when there is the possibility of correlated defaults. Using a multivariate normal Copula function for the joint default…
We consider the portfolio optimization with risk measured by conditional value-at-risk, based on the stress event of chosen asset being equal to the opposite of its value-at-risk level, under the normality assumption. Solvability conditions…
In this paper we study a continuous-time stochastic linear quadratic control problem arising from mathematical finance. We model the asset dynamics with random market coefficients and portfolio strategies with convex constraints. Following…
The benefits of diversifying risks are difficult to estimate quantitatively because of the uncertainties in the dependence structure between the risks. Also, the modelling of multidimensional dependencies is a non-trivial task. This paper…
The mean-variance portfolio model, based on the risk-return trade-off for optimal asset allocation, remains foundational in portfolio optimization. However, its reliance on restrictive assumptions about asset return distributions limits its…
We apply the sample average approximation (SAA) method to risk-neutral optimization problems governed by nonlinear partial differential equations (PDEs) with random inputs. We analyze the consistency of the SAA optimal values and SAA…
We study singular stochastic control of a two dimensional stochastic differential equation, where the first component is linear with random and unbounded coefficients. We derive existence of an optimal relaxed control and necessary…
This paper focuses on a dynamic multi-asset mean-variance portfolio selection problem under model uncertainty. We develop a continuous time framework for taking into account ambiguity aversion about both expected return rates and…
We study the portfolio problem of maximizing the outperformance probability over a random benchmark through dynamic trading with a fixed initial capital. Under a general incomplete market framework, this stochastic control problem can be…
This paper develops a method to derive optimal portfolios and risk premia explicitly in a general diffusion model for an investor with power utility and a long horizon. The market has several risky assets and is potentially incomplete.…