Related papers: Sizing the bets in a focused portfolio
The optimal allocation of assets has been widely discussed with the theoretical analysis of risk measures, and pessimism is one of the most attractive approaches beyond the conventional optimal portfolio model. The $\alpha$-risk plays a…
This is the third paper in a series concerning the game-theoretic aspects of position-building while in competition. The first paper set forth foundations and laid out the essential goal, which is to minimize implementation costs in light…
We formulate an adaptive version of Kelly's horse model in which the gambler learns from past race results using Bayesian inference. A known asymptotic scaling for the difference between the growth rate of the gambler and the optimal growth…
Graphical models are a powerful tool to estimate a high-dimensional inverse covariance (precision) matrix, which has been applied for a portfolio allocation problem. The assumption made by these models is a sparsity of the precision matrix.…
Excessive leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be…
We present analytical investigations of a multiplicative stochastic process that models a simple investor dynamics in a random environment. The dynamics of the investor's budget, $x(t)$, depends on the stochasticity of the return on…
Portfolio optimization methods have evolved significantly since Markowitz introduced the mean-variance framework in 1952. While the theoretical appeal of this approach is undeniable, its practical implementation poses important challenges,…
It is well known that quantile regression model minimizes the portfolio extreme risk, whenever the attention is placed on the estimation of the response variable left quantiles. We show that, by considering the entire conditional…
In this paper, we consider $n$ agents who invest in a general financial market that is free of arbitrage and complete. The aim of each investor is to maximize her expected utility while ensuring, with a specified probability, that her…
We designed a machine learning algorithm that identifies patterns between ESG profiles and financial performances for companies in a large investment universe. The algorithm consists of regularly updated sets of rules that map regions into…
A quantum-inspired optimization approach is proposed to study the portfolio optimization aimed at selecting an optimal mix of assets based on the risk-return trade-off to achieve the desired goal in investment. By integrating conventional…
This paper studies a distributionally robust portfolio optimization model with a cardinality constraint for limiting the number of invested assets. We formulate this model as a mixed-integer semidefinite optimization (MISDO) problem by…
It is a common misconception that in order to make consistent profits as a trader, one needs to posses some extra information leading to an asset value estimation more accurate than that reflected by the current market price. While the idea…
This paper studies a portfolio allocation problem, where the goal is to prescribe the wealth distribution at the final time. We study this problem with the tools of optimal mass transport. We provide a dual formulation which we solve by a…
All the financial practitioners are working in incomplete markets full of unhedgeable risk-factors. Making the situation worse, they are only equipped with the imperfect information on the relevant processes. In addition to the market risk,…
We consider an arbitrage-free, discrete time and frictionless market. We prove that an investor maximising the expected utility of her terminal wealth can always find an optimal investment strategy provided that her dissatisfaction of…
For long term investments, model portfolios are defined at the level of indexes, a setup known as Strategic Asset Allocation (SAA). The possible outcomes at a scale of a few decades can be obtained by Monte Carlo simulations, resulting in a…
The Portfolio Optimization task has long been studied in the Financial Services literature as a procedure to identify the basket of assets that satisfy desired conditions on the expected return and the associated risk. A well-known approach…
We consider the design of private prediction markets, financial markets designed to elicit predictions about uncertain events without revealing too much information about market participants' actions or beliefs. Our goal is to design market…
In this paper we consider the strategic asset allocation of an insurance company. This task can be seen as a special case of portfolio optimization. In the 1950s, Markowitz proposed to formulate portfolio optimization as a bicriteria…