Related papers: Mitigating Extremal Risks: A Network-Based Portfol…
The failure of key financial institutions may accelerate risk contagion due to their interconnections within the system. In this paper, we propose a robust portfolio strategy to mitigate systemic risks during extreme events. We use the…
We provide a comprehensive review of causal dependence through a max-linear structural equation model. Such models express each node variable as a max-linear function of its parental node variables in a directed acyclic graph and some…
The main contribution of the paper is to employ the financial market network as a useful tool to improve the portfolio selection process, where nodes indicate securities and edges capture the dependence structure of the system. Three…
In this study, we propose a new multi-objective portfolio optimization with idiosyncratic and systemic risks for financial networks. The two risks are measured by the idiosyncratic variance and the network clustering coefficient derived…
Using daily returns of the S&P 500 stocks from 2001 to 2011, we perform a backtesting study of the portfolio optimization strategy based on the extreme risk index (ERI). This method uses multivariate extreme value theory to minimize the…
Systemic risk arises as a multi-layer network phenomenon. Layers represent direct financial exposures of various types, including interbank liabilities, derivative- or foreign exchange exposures. Another network layer of systemic risk…
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…
We investigate an application of network centrality measures to portfolio optimization, by generalizing the method in [Pozzi, Di Matteo and Aste, \emph{Spread of risks across financial markets: better to invest in the peripheries},…
In this article we deal with the problem of portfolio allocation by enhancing network theory tools. We use the dependence structure of the correlations network in constructing some well-known risk-based models in which the estimation of…
Extreme values and the tail behavior of probability distributions are essential for quantifying and mitigating risk in complex systems of all kinds. In multivariate settings, accounting for correlations is crucial. Although extreme value…
Development of stock networks is an important approach to explore the relationship between different stocks in the era of big-data. Although a number of methods have been designed to construct the stock correlation networks, it is still a…
We adopt deep learning models to directly optimise the portfolio Sharpe ratio. The framework we present circumvents the requirements for forecasting expected returns and allows us to directly optimise portfolio weights by updating model…
Understanding the dependencies among financial assets is critical for portfolio optimization. Traditional approaches based on correlation networks often fail to capture the nonlinear and directional relationships that exist in financial…
Analysis of the rare and extreme values through statistical modeling is an important issue in economical crises, climate forecasting, and risk management of financial portfolios. Extreme value theory provides the probability models needed…
We investigate how and when to diversify capital over assets, i.e., the portfolio selection problem, from a signal processing perspective. To this end, we first construct portfolios that achieve the optimal expected growth in i.i.d.…
We consider an investor, whose portfolio consists of a single risky asset and a risk free asset, who wants to maximize his expected utility of the portfolio subject to the Value at Risk assuming a heavy tail distribution of the stock prices…
This paper investigates the use of extreme value theory for modelling the distribution of demand-net-of-wind for capacity adequacy assessment. Extreme value theory approaches are well-established and mathematically justified methods for…
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…
The control and risk assessment in complex information systems require to take into account extremes arising from nodes with large node degrees. Various sampling techniques like a Page Rank random walk, a Metropolis-Hastings Markov chain…
A cryptocurrency is a digital asset maintained by a decentralised system using cryptography. Investors in this emerging digital market are exploring the profitability potential of portfolios in place of single coins. Portfolios are…