Related papers: Optimizing Sparse Mean-Reverting Portfolio
The existing approaches to sparse wealth allocations (1) are limited to low-dimensional setup when the number of assets is less than the sample size; (2) lack theoretical analysis of sparse wealth allocations and their impact on portfolio…
Portfolio optimization is a critical task in investment. Most existing portfolio optimization methods require information on the distribution of returns of the assets that make up the portfolio. However, such distribution information is…
Portfolio optimization approaches inevitably rely on multivariate modeling of markets and the economy. In this paper, we address three sources of error related to the modeling of these complex systems: 1. oversimplifying hypothesis; 2.…
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…
The paper studies problem of continuous time optimal portfolio selection for a incom- plete market diffusion model. It is shown that, under some mild conditions, near optimal strategies for investors with different performance criteria can…
In this paper, we propose a machine learning algorithm for time-inconsistent portfolio optimization. The proposed algorithm builds upon neural network based trading schemes, in which the asset allocation at each time point is determined by…
This study develops an inverse portfolio optimization framework for recovering latent investor preferences including risk aversion, transaction cost sensitivity, and ESG orientation from observed portfolio allocations. Using controlled…
In this paper, we study the portfolio optimization problem with general utility functions and when the return and volatility of underlying asset are slowly varying. An asymptotic optimal strategy is provided within a specific class of…
In this review, we provide practical guidance on some of the main machine learning tools used in portfolio weight formation. This is not an exhaustive list, but a fraction of the ones used and have some statistical analysis behind it. All…
A drawdown constraint forces the current wealth to remain above a given function of its maximum to date. We consider the portfolio optimisation problem of maximising the long-term growth rate of the expected utility of wealth subject to a…
In recent years, the evaluation of the minimal investment risk of the quenched disordered system of a portfolio optimization problem and the investment concentration of the optimal portfolio has been actively investigated using the analysis…
In this paper we develop a concrete and fully implementable approach to the optimization of functionally generated portfolios in stochastic portfolio theory. The main idea is to optimize over a family of rank-based portfolios parameterized…
A market portfolio is a portfolio in which each asset is held at a weight proportional to its market value. Functionally generated portfolios are portfolios for which the logarithmic return relative to the market portfolio can be decomposed…
The idiosyncratic (microscopic) and systemic (macroscopic) components of market structure have been shown to be responsible for the departure of the optimal mean-variance allocation from the heuristic `equally-weighted' portfolio. In this…
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…
Stochastic portfolio theory aims at finding relative arbitrages, i.e. trading strategies which outperform the market with probability one. Functionally generated portfolios, which are deterministic functions of the market weights, are an…
We extend Relative Robust Portfolio Optimisation models to allow portfolios to optimise their distance to a set of benchmarks. Portfolio managers are also given the option of computing regret in a way which is more in line with market…
In this paper, we explore an optimal timing strategy for the trading of price spreads exhibiting mean-reverting characteristics. A sequential optimal stopping framework is formulated to analyze the optimal timings for both entering and…
In this paper, we consider the optimal portfolio liquidation problem under the dynamic mean-variance criterion and derive time-consistent solutions in three important models. We give adapted optimal strategies under a reconsidered…
Considering mean-variance portfolio problems with uncertain model parameters, we contrast the classical absolute robust optimization approach with the relative robust approach based on a maximum regret function. Although the latter problems…