Related papers: Market-Based Portfolio Variance
In this paper, we revisit the relationship between investors' utility functions and portfolio allocation rules. We derive portfolio allocation rules for asymmetric Laplace distributed $ALD(\mu,\sigma,\kappa)$ returns and compare them with…
The use of factor stochastic volatility models requires choosing the number of latent factors used to describe the dynamics of the financial returns process; however, empirical evidence suggests that the number and makeup of pertinent…
We propose a method for extending a given asset pricing formula to account for two additional sources of risk: the risk associated with future changes in market--calibrated parameters and the remaining risk associated with idiosyncratic…
We consider a reference security, understood to be an attractive investment, with the caveat that an investor is not willing to directly invest in the security, for presence of constraints, either investor specific or pertaining to the…
This paper studies the continuous time mean-variance portfolio selection problem with one kind of non-linear wealth dynamics. To deal the expectation constraint, an auxiliary stochastic control problem is firstly solved by two new…
A market portfolio is a portfolio in which each asset is held at a weight proportional to its market value. Functionally generated portfolios are portfolios for which the logarithmic return relative to the market portfolio can be decomposed…
We consider an investor who seeks to maximize her expected utility derived from her terminal wealth relative to the maximum performance achieved over a fixed time horizon, and under a portfolio drawdown constraint, in a market with local…
Designing an optimum portfolio that allocates weights to its constituent stocks in a way that achieves the best trade-off between the return and the risk is a challenging research problem. The classical mean-variance theory of portfolio…
This paper considers two investors who perform mean-variance portfolio selection with asymmetric information: one knows the true stock dynamics, while the other has to infer the true dynamics from observed stock evolution. Their portfolio…
Classical portfolio optimization methods typically determine an optimal capital allocation through the implicit, yet critical, assumption of statistical time-invariance. Such models are inadequate for real-world markets as they employ…
Markowitz (1952, 1959) laid down the ground-breaking work on the mean-variance analysis. Under his framework, the theoretical optimal allocation vector can be very different from the estimated one for large portfolios due to the intrinsic…
The investor is interested in the expected return and he is also concerned about the risk and the uncertainty assumed by the investment. One of the most popular concepts used to measure the risk and the uncertainty is the variance and/or…
The standard approach for constructing a Mean-Variance portfolio involves estimating parameters for the model using collected samples. However, since the distribution of future data may not resemble that of the training set, the…
Although the understanding of and motivation behind individual trading behavior is an important puzzle in finance, little is known about the connection between an investor's portfolio structure and her trading behavior in practice. In this…
The potential benefits of portfolio diversification have been known to investors for a long time. Markowitz (1952) suggested the seminal approach for optimizing the portfolio problem based on finding the weights as budget shares that…
Using high frequency data, we have studied empirically the change of volatility, also called volatility derivative, for various time horizons. In particular, the correlation between the volatility derivative and the volatility realized in…
This paper considers the mean variance portfolio management problem. We examine portfolios which contain both primary and derivative securities. The challenge in this context is due to portfolio's nonlinearities. The delta-gamma…
Motivated by recent advances in the spectral theory of auto-covariance matrices, we are led to revisit a reformulation of Markowitz' mean-variance portfolio optimization approach in the time domain. In its simplest incarnation it applies to…
Financial markets tend to switch between various market regimes over time, making stationarity-based models unsustainable. We construct a regime-switching model independent of asset classes for risk-adjusted return predictions based on…
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…