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Standard, PCA-based factor analysis suffers from a number of well known problems due to the random nature of pairwise correlations of asset returns. We analyse an alternative based on ICA, where factors are identified based on their…
In this paper, we discuss the ambiguous chance constrained based portfolio optimization problems, in which the perturbations associated with the input parameters are stochastic in nature, but their distributions are not known precisely. We…
This paper uses new and recently established methodologies to study the evolutionary dynamics of the cryptocurrency market, and compares the findings with that of the equity market. We begin by applying random matrix theory and principal…
Portfolio optimisation is essential in quantitative investing, but its implementation faces several practical difficulties. One particular challenge is converting optimal portfolio weights into real-life trades in the presence of realistic…
The instability of historical risk factor correlations renders their use in estimating portfolio risk extremely questionable. In periods of market stress correlations of risk factors have a tendency to quickly go well beyond estimated…
Diversification of an investment into independently fluctuating assets reduces its risk. In reality, movement of assets are are mutually correlated and therefore knowledge of cross--correlations among asset price movements are of great…
In this paper, we present an integrated approach to portfolio construction and optimization, leveraging high-performance computing capabilities. We first explore diverse pairings of generative model forecasts and objective functions used…
We study mean-risk optimal portfolio problems where risk is measured by Recovery Average Value at Risk, a prominent example in the class of recovery risk measures. We establish existence results in the situation where the joint distribution…
We address the problem of portfolio optimization under the simplest coherent risk measure, i.e. the expected shortfall. As it is well known, one can map this problem into a linear programming setting. For some values of the external…
The expanding number of assets offers more opportunities for investors but poses new challenges for modern portfolio management (PM). As a central plank of PM, portfolio selection by expected utility maximization (EUM) faces uncontrollable…
Based on a faithful representation of the heavy tail multivariate distribution of asset returns introduced previously (Sornette et al., 1998, 1999) that we extend to the case of asymmetric return distributions, we generalize the return-risk…
In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the…
As global financial markets become increasingly interconnected, financial contagion has developed into a major influencer of asset price dynamics. Motivated by this context, our study explores financial contagion both within and between…
In this paper, we consider the basic problem of portfolio construction in financial engineering, and analyze how market-based and analytical approaches can be combined to obtain efficient portfolios. As a first step in our analysis, we…
Optimizing portfolio performance is a fundamental challenge in financial modeling, requiring the integration of advanced clustering techniques and data-driven optimization strategies. This paper introduces a comparative backtesting approach…
In recent years, cryptocurrencies have gone from an obscure niche to a prominent place, with investment in these assets becoming increasingly popular. However, cryptocurrencies carry a high risk due to their high volatility. In this paper,…
A so called Zipf analysis portofolio management technique is introduced in order to comprehend the risk and returns. Two portofoios are built each from a well known financial index. The portofolio management is based on two approaches: one…
Inheritance is the fundamental building block of civilization. This is the addition of wealth, knowledge and properties over time that produce the society in which we are living. Every generation does not have to start from zero and can…
Cryptocurrency markets are highly volatile and influenced by both price trends and market sentiment, making effective portfolio management challenging. This paper proposes a dynamic cryptocurrency portfolio strategy that integrates…
This paper derives an optimal portfolio that is based on trend-following signal. Building on an earlier related article, it provides a unifying theoretical setting to introduce an autocorrelation model with the covariance matrix of trends…