Related papers: Market-Based Portfolio Variance
We study the continuous time portfolio optimization model on the market where the mean returns of individual securities or asset categories are linearly dependent on underlying economic factors. We introduce the functional $Q_\gamma$…
The portfolio optimization problem in which the variances of the return rates of assets are not identical is analyzed in this paper using the methodology of statistical mechanical informatics, specifically, replica analysis. We define two…
Entropy based ideas find wide-ranging applications in finance for calibrating models of portfolio risk as well as options pricing. The abstracted problem, extensively studied in the literature, corresponds to finding a probability measure…
One of the major issues studied in finance that has always intrigued, both scholars and practitioners, and to which no unified theory has yet been discovered, is the reason why prices move over time. Since there are several well-known…
The capitalization-weighted total relative variation $\sum_{i=1}^d \int_0^\cdot \mu_i (t) \mathrm{d} \langle \log \mu_i \rangle (t)$ in an equity market consisting of a fixed number $d$ of assets with capitalization weights $\mu_i (\cdot)$…
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…
In a fixed time horizon, appropriately executing a large amount of a particular asset -- meaning a considerable portion of the volume traded within this frame -- is challenging. Especially for illiquid or even highly liquid but also highly…
We analyze empirical data for 4,000 real-life trading portfolios (U.S. equities) with holding periods of about 0.7-19 trading days. We find a simple scaling C ~ 1/T, where C is cents-per-share, and T is the portfolio turnover. Thus, the…
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 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…
A continuous-time Markowitz's mean-variance portfolio selection problem is studied in a market with one stock, one bond, and proportional transaction costs. This is a singular stochastic control problem,inherently in a finite time horizon.…
We consider how to optimally allocate investments in a portfolio of competing technologies using the standard mean-variance framework of portfolio theory. We assume that technologies follow the empirically observed relationship known as…
We study a continuous-time Markowitz mean-variance portfolio selection model in which a naive agent, unaware of the underlying time-inconsistency, continuously reoptimizes over time. We define the resulting naive policies through the limit…
The fundamental principle in Modern Portfolio Theory (MPT) is based on the quantification of the portfolio's risk related to performance. Although MPT has made huge impacts on the investment world and prompted the success and prevalence of…
Portfolio management is the decision-making process of allocating an amount of fund into different financial investment products. Cryptocurrencies are electronic and decentralized alternatives to government-issued money, with Bitcoin as the…
Market confidence is essential for successful investing. By incorporating multi-market into the evolutionary minority game, we investigate the effects of investor beliefs on the evolution of collective behaviors and asset prices. When there…
Maximum likelihood estimation applied to high-frequency data allows us to quantify intermittency in the fluctu- ations of asset prices. From time records as short as one month these methods permit extraction of a meaningful intermittency…
This paper studies an equity market of stochastic dimension, where the number of assets fluctuates over time. In such a market, we develop the fundamental theorem of asset pricing, which provides the equivalence of the following statements:…
Traders are often faced with large block orders in markets with limited liquidity and varying volatility. Executing the entire order at once usually incurs a large trading cost because of this limited liquidity. In order to minimize this…
We introduce a neural network approach for assessing the risk of a portfolio of assets and liabilities over a given time period. This requires a conditional valuation of the portfolio given the state of the world at a later time, a problem…