Related papers: Sizing the bets in a focused portfolio
Asset allocation is an investment strategy that aims to balance risk and reward by constantly redistributing the portfolio's assets according to certain goals, risk tolerance, and investment horizon. Unfortunately, there is no simple…
Facing the FRTB, banks need to allocate their capital to each business units or risk positions to evaluate the capital efficiency of their strategies. This paper proposes two computationally efficient allocation methods which are weighted…
Risk control and optimal diversification constitute a major focus in the finance and insurance industries as well as, more or less consciously, in our everyday life. We present a discussion of the characterization of risks and of the…
In this paper, motivated by the celebrated work of Kelly, we consider the problem of portfolio weight selection to maximize expected logarithmic growth. Going beyond existing literature, our focal point here is the rebalancing frequency…
We study the dynamic investment decisions of investors who prioritise specific quantiles of outcomes over their expected values. Downside-focused agents targeting low quantiles reduce risk in states with high variance, while those with a…
A continuous-time consumption-investment model with constraint is considered for a small investor whose decisions are the consumption rate and the allocation of wealth to a risk-free and a risky asset with logarithmic Brownian motion…
Changes in market conditions present challenges for investors as they cause performance to deviate from the ranges predicted by long-term averages of means and covariances. The aim of conditional asset allocation strategies is to overcome…
This paper presents a novel approach for optimizing betting strategies in sports gambling by integrating Von Neumann-Morgenstern Expected Utility Theory, deep learning techniques, and advanced formulations of the Kelly Criterion. By…
We consider the problem of optimal investment and consumption in a class of multidimensional jump-diffusion models in which asset prices are subject to mutually exciting jump processes. This captures a type of contagion where each downward…
A classical portfolio theory deals with finding the optimal proportion in which an agent invests a wealth in a risk-free asset and a probabilistic risky asset. Formulating and solving the problem depend on how the risk is represented and…
This paper defines systematic value investing as an empirical optimization problem. Predictive modeling is introduced as a systematic value investing methodology with dynamic and optimization features. A predictive modeling process is…
Portfolio selection in the periodic investment of securities modeled by a multivariate Merton model with dependent jumps is considered. The optimization framework is designed to maximize expected terminal wealth when portfolio risk is…
In this paper, as a first step in examining the properties of a feasible portfolio subset that is characterized by budget and risk constraints, we assess the maximum and minimum of the investment concentration using replica analysis. To do…
Given a set of assets and an investment capital, the classical portfolio selection problem consists in determining the amount of capital to be invested in each asset in order to build the most profitable portfolio. The portfolio…
Obtaining utility maximizing optimal portfolios in closed form is a challenging issue when the return vector follows a more general distribution than the normal one. In this note, we give closed form expressions, in markets based on…
This article develops the theory of risk budgeting portfolios, when we would like to impose weight constraints. It appears that the mathematical problem is more complex than the traditional risk budgeting problem. The formulation of the…
We first estimate the average growth of a company's annual income and its variance by using both real company data and a numerical model which we already introduced a couple of years ago. Investment strategies expecting for income growth is…
We investigate the problem of gambling with uncertainty in outcome probabilities. Stochastic optimization models are proposed for optimal investing on events with mutually exclusive outcomes when probabilities are estimated using…
Efforts to apply economic complexity to identify diversification opportunities often rely on diagrams comparing the relatedness and complexity or products, technologies, or industries. Yer, the use of these diagrams is not based on…
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…