Related papers: A Portfolio's Common Causal Conditional Risk-neutr…
Parametric conditional copula models allow the copula parameters to vary with a set of covariates according to an unknown calibration function. Flexible Bayesian inference for the calibration function of a bivariate conditional copula is…
This paper focuses on inverse problems to identify parameters by incorporating information from measurements. These generally ill-posed problems are formulated here in a probabilistic setting based on Bayes's theorem because it leads to a…
PD curve calibration refers to the transformation of a set of rating grade level probabilities of default (PDs) to another average PD level that is determined by a change of the underlying portfolio-wide PD. This paper presents a framework…
For a linear combination of random variables, fix some confidence level and consider the quantile of the combination at this level. We are interested in the partial derivatives of the quantile with respect to the weights of the random…
We analyze conditional optimization problems arising in discrete time Principal-Agent problems of delegated portfolio optimization with linear contracts. Applying tools from Conditional Analysis we show that some results known in the…
This paper proposes a portfolio construction framework designed to remain robust under estimation error, non-stationarity, and realistic trading constraints. The methodology combines dynamic asset eligibility, deterministic rebalancing, and…
We consider the problem of portfolio optimization with a correlation constraint. The framework is the multiperiod stochastic financial market setting with one tradable stock, stochastic income and a non-tradable index. The correlation…
A quadratic discrete time probabilistic model, for optimal portfolio selection in (re-)insurance is studied. For positive values of underwriting levels, the expected value of the accumulated result is optimized, under constraints on its…
Partial differential equation (PDE) models are widely used in engineering and natural sciences to describe spatio-temporal processes. The parameters of the considered processes are often unknown and have to be estimated from experimental…
We present an arbitrage free theoretical framework for modeling bid and ask prices of dividend paying securities in a discrete time setup using theory of dynamic acceptability indices. In the first part of the paper we develop the theory of…
In this article, inspired by Shi, et al. we investigate the optimal portfolio selection with one risk-free asset and one risky asset in a multiple period setting under cumulative prospect theory (CPT). Compared with their study, our novelty…
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…
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…
A diversification quotient (DQ) quantifies diversification in stochastic portfolio models based on a family of risk measures. We study DQ based on expectiles, offering a useful alternative to conventional risk measures such as Value-at-Risk…
Individual risk models need to capture possible correlations as failing to do so typically results in an underestimation of extreme quantiles of the aggregate loss. Such dependence modelling is particularly important for managing credit…
Modeling returns on large portfolios is a challenging problem as the number of parameters in the covariance matrix grows as the square of the size of the portfolio. Traditional correlation models, for example, the dynamic conditional…
We present Causal Posterior Estimation (CPE), a novel method for Bayesian inference in simulator models, i.e., models where the evaluation of the likelihood function is intractable or too computationally expensive, but where one can…
Duality for robust hedging with proportional transaction costs of path dependent European options is obtained in a discrete time financial market with one risky asset. Investor's portfolio consists of a dynamically traded stock and a static…
The classical mean-variance portfolio selection problem induces time-inconsistent (precommited) strategies (see Zhou and Li (2000)). To overcome this time-inconsistency, Basak and Chabakauri (2010) introduce the game theoretical approach…
In this paper, we present a two-stage stochastic international portfolio optimisation model to find an optimal allocation for the combination of both assets and currency hedging positions. Our optimisation model allows a "currency overlay",…