Related papers: A Dynamic Model of Private Asset Allocation
We consider a portfolio optimization problem in a defaultable market with finitely-many economical regimes, where the investor can dynamically allocate her wealth among a defaultable bond, a stock, and a money market account. The market…
A discrete time probabilistic model, for optimal equity allocation and portfolio selection, is formulated so as to apply to (at least) reinsurance. In the context of a company with several portfolios (or subsidiaries), representing both…
The variance measures the portfolio risks the investors are taking. The investor, who holds his portfolio and doesn't trade his shares, at the current time can use the time series of the market trades that were made during the averaging…
This work extends a previous work in regime detection, which allowed trading positions to be profitably adjusted when a new regime was detected, to ex ante prediction of regimes, leading to substantial performance improvements over the…
We develop a dynamic multi-agent model of an interbank payment system where banks choose their level of available funds on the basis of private payoff maximisation. The model consists of the repetition of a simultaneous move stage game with…
We give a new predictive mathematical model for macroeconomics, which deals specifically with asset prices and earnings fluctuations, in the presence of a dynamic economy involving mergers, acquisitions, and hostile takeovers. Consider a…
The correlation matrix is the key element in optimal portfolio allocation and risk management. In particular, the eigenvectors of the correlation matrix corresponding to large eigenvalues can be used to identify the market mode, sectors and…
The mean-variance portfolio model, based on the risk-return trade-off for optimal asset allocation, remains foundational in portfolio optimization. However, its reliance on restrictive assumptions about asset return distributions limits its…
This study analyzes the dynamic interactions among the NASDAQ index, crude oil, gold, and the US dollar using a reduced-order modeling approach. Time-delay embedding and principal component analysis are employed to encode high-dimensional…
Designing a financial market that works well is very important for developing and maintaining an advanced economy, but is not easy because changing detailed rules, even ones that seem trivial, sometimes causes unexpected large impacts and…
This work initiates research into the problem of determining an optimal investment strategy for investors with different attitudes towards the trade-offs of risk and profit. The probability distribution of the return values of the stocks…
The dynamic portfolio construction problem requires dynamic modeling of the joint distribution of multivariate stock returns. To achieve this, we propose a dynamic generative factor model which uses random variable transformation as an…
Recently, in order to explore the mechanism behind wealth or income distribution, several models have been proposed by applying principles of statistical mechanics. These models share some characteristics, such as consisting of a group of…
We have studied here the self-organising features of the dynamics of a model market, where the agents `trade' for a single commodity with their money. The model market consists of fixed numbers of economic agents, money supply and…
We propose a model in which dividend payments occur at regular, deterministic intervals in an otherwise continuous model. This contrasts traditional models where either the payment of continuous dividends is controlled or the dynamics are…
This paper investigates the investment behaviour of a large unregulated financial institution (FI) with CARA risk preferences. It shows how the FI optimizes its trading to account for market illiquidity using an extension of the…
We process private equity transactions to predict public market behavior with a logit model. Specifically, we estimate our model to predict quarterly returns for both the broad market and for individual sectors. Our hypothesis is that…
For a long investment time horizon, it is preferable to rebalance the portfolio weights at intermediate times. This necessitates a multi-period market model in which portfolio optimization is usually done through dynamic programming.…
We study portfolio selection in a complete continuous-time market where the preference is dictated by the rank-dependent utility. As such a model is inherently time inconsistent due to the underlying probability weighting, we study the…
Market Mill is a complex dependence pattern leading to nonlinear correlations and predictability in intraday dynamics of stock prices. The present paper puts together previous efforts to build a dynamical model reflecting the market mill…