Related papers: Market-Based Portfolio Variance
We examine volatility of an Indian stock market in terms of aspects like participation, synchronization of stocks and quantification of volatility using the random matrix approach. Volatility pattern of the market is found using the BSE…
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,…
Stochastic portfolio theory aims at finding relative arbitrages, i.e. trading strategies which outperform the market with probability one. Functionally generated portfolios, which are deterministic functions of the market weights, are an…
For long term investments, model portfolios are defined at the level of indexes, a setup known as Strategic Asset Allocation (SAA). The possible outcomes at a scale of a few decades can be obtained by Monte Carlo simulations, resulting in a…
As the cornerstone of modern portfolio theory, Markowitz's mean-variance optimization is considered a major model adopted in portfolio management. However, due to the difficulty of estimating its parameters, it cannot be applied to all…
We study how to assess the potential benefit of diversifying an equity portfolio by investing within and across equity sectors. We analyse 20 years of US stock price data, which includes the global financial crisis (GFC) and the COVID-19…
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…
To improve the efficient frontier of the classical mean-variance model in continuous time, we propose a varying terminal time mean-variance model with a constraint on the mean value of the portfolio asset, which moves with the varying…
Since risky positions in multivariate portfolios can be offset by various choices of capital requirements that depend on the exchange rules and related transaction costs, it is natural to assume that the risk measures of random vectors are…
A large portfolio of independent returns is optimized under the variance risk measure with a ban on short positions. The no-short selling constraint acts as an asymmetric $\ell_1$ regularizer, setting some of the portfolio weights to zero…
This paper considers the finite horizon portfolio rebalancing problem in terms of mean-variance optimization, where decisions are made based on current information on asset returns and transaction costs. The study's novelty is that the…
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…
We exploit a continuous time random walk description of stock prices to obtain a fast and accurate evaluation of their volatility from intraday data. We show that financial markets are usefully described as open physical systems. Indeed we…
In this report we derive the strategic (deterministic) allocation to bonds and stocks resulting in the optimal mean-variance trade-off on a given investment horizon. The underlying capital market features a mean-reverting process for equity…
The scaling properties of the time series of asset prices and trading volumes of stock markets are analysed. It is shown that similarly to the asset prices, the trading volume data obey multi-scaling length-distribution of low-variability…
The classical mean-variance framework characterizes portfolio risk solely through return variance and the covariance matrix, implicitly assuming that all relevant sources of risk are captured by second moments. In modern financial markets,…
We introduce a faithful representation of the heavy tail multivariate distribution of asset returns, as parsimonous as the Gaussian framework. Using calculation techniques of functional integration and Feynman diagrams borrowed from…
High precision analytical approximation is proposed for variance-covariance based risk allocation in a portfolio of risky assets. A general case of a single-period multi-factor Merton-type model with stochastic recovery is considered. The…
This paper studies a robust portfolio optimization problem under the multi-factor volatility model introduced by Christoffersen et al. (2009). The optimal strategy is derived analytically under the worst-case scenario with or without…
This paper investigates a time-inconsistent portfolio selection problem in the incomplete mar ket model, integrating expected utility maximization with risk control. The objective functional balances the expected utility and variance on log…