Related papers: Multiscale Markowitz
Portfolio optimization is a task that investors use to determine the best allocations for their investments, and fund managers implement computational models to help guide their decisions. While one of the most common portfolio optimization…
Since Markowitz's mean-variance framework, optimizing a portfolio that maximizes the profit and minimizes the risk has been ubiquitous in the financial industry. Initially, profit and risk were measured by the first two moments of the…
We consider the investor who doesn't trade shares of his portfolio. The investor only observes the current trades made in the market with his securities to estimate the current return, variance, and risks of his unchanged portfolio. We show…
Markowitz mean-variance portfolios with sample mean and covariance as input parameters feature numerous issues in practice. They perform poorly out of sample due to estimation error, they experience extreme weights together with high…
This paper studies a continuous-time market where an agent, having specified an investment horizon and a targeted terminal mean return, seeks to minimize the variance of the return. The optimal portfolio of such a problem is called…
In his famous paper, Markowitz (1952) derived the dependence of portfolio random returns on the random returns of its securities. This result allowed Markowitz to obtain his famous expression for portfolio variance. We show that Markowitz's…
Volatility, as a primary indicator of financial risk, forms the foundation of classical frameworks such as Markowitz's Portfolio Theory and the Efficient Market Hypothesis (EMH). However, its conventional use rests on assumptions-most…
The Markowitz mean-variance portfolio optimization model aims to balance expected return and risk when investing. However, there is a significant limitation when solving large portfolio optimization problems efficiently: the large and dense…
More than seventy years ago Harry Markowitz formulated portfolio construction as an optimization problem that trades off expected return and risk, defined as the standard deviation of the portfolio returns. Since then the method has been…
We show that the Markowitz portfolio is a scalar multiple of another portfolio which replaces the covariance with the second moment matrix, via simple application of the Sherman-Morrison identity. Moreover it is shown that when using…
With the good development in the financial industry, the market starts to catch people's eyes, not only by the diversified investing choices ranging from bonds and stocks to futures and options but also by the general "high-risk,…
This paper proposes a new method for financial portfolio optimization based on reducing simultaneous asset shocks across a collection of assets. This may be understood as an alternative approach to risk reduction in a portfolio based on a…
Choosing a portfolio of risky assets over time that maximizes the expected return at the same time as it minimizes portfolio risk is a classical problem in Mathematical Finance and is referred to as the dynamic Markowitz problem (when the…
This paper explores the effectiveness of high-frequency options trading strategies enhanced by advanced portfolio optimization techniques, investigating their ability to consistently generate positive returns compared to traditional long or…
This paper studies a robust continuous-time Markowitz portfolio selection pro\-blem where the model uncertainty carries on the covariance matrix of multiple risky assets. This problem is formulated into a min-max mean-variance problem over…
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,…
This paper explores the practical approach to portfolio selection methods for investments. The study delves into portfolio theory, discussing concepts such as expected return, variance, asset correlation, and opportunity sets. It also…
Modern portfolio theory(MPT) addresses the problem of determining the optimum allocation of investment resources among a set of candidate assets. In the original mean-variance approach of Markowitz, volatility is taken as a proxy for risk,…
Empirical studies indicate the presence of multi-scales in the volatility of underlying assets: a fast-scale on the order of days and a slow-scale on the order of months. In our previous works, we have studied the portfolio optimization…
We extend and test empirically the multifractal model of asset returns based on a multiplicative cascade of volatilities from large to small time scales. The multifractal description of asset fluctuations is generalized into a multivariate…