Related papers: Novel Risk Measures for Portfolio Optimization Usi…
We consider the problem of the statistical uncertainty of the correlation matrix in the optimization of a financial portfolio. We show that the use of clustering algorithms can improve the reliability of the portfolio in terms of the ratio…
We study the sensitivity to estimation error of portfolios optimized under various risk measures, including variance, absolute deviation, expected shortfall and maximal loss. We introduce a measure of portfolio sensitivity and test the…
Risk parity, also known as equal risk contribution, has recently gained increasing attention as a portfolio allocation method. However, solving portfolio weights must resort to numerical methods as the analytic solution is not available.…
We investigate how and when to diversify capital over assets, i.e., the portfolio selection problem, from a signal processing perspective. To this end, we first construct portfolios that achieve the optimal expected growth in i.i.d.…
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 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…
Market conditions change continuously. However, in portfolio's investment strategies, it is hard to account for this intrinsic non-stationarity. In this paper, we propose to address this issue by using the Inverse Covariance Clustering…
We investigate the use of Kelly's strategy in the construction of an optimal portfolio of assets. For lognormally distributed asset returns, we derive approximate analytical results for the optimal investment fractions in various settings.…
This article is focused on using a new measurement of risk-- Weighted Value at Risk to develop a new method of constructing initiate from the TVAR solving problem, based on MATLAB software, using the historical simulation method (avoiding…
Portfolio management is an essential component of investment strategy that aims to maximize returns while minimizing risk. This paper explores several portfolio management strategies, including asset allocation, diversification, active…
Recurring international financial crises have adverse socioeconomic effects and demand novel regulatory instruments or strategies for risk management and market stabilization. However, the complex web of market interactions often impedes…
The paper studies problem of continuous time optimal portfolio selection for a incom- plete market diffusion model. It is shown that, under some mild conditions, near optimal strategies for investors with different performance criteria can…
This article develops the theory of risk budgeting portfolios, when we would like to impose weight constraints. It appears that the mathematical problem is more complex than the traditional risk budgeting problem. The formulation of the…
In this paper, we are concerned with the optimization of a dynamic investment portfolio when the securities which follow a multivariate Merton model with dependent jumps are periodically invested and proceed by approximating the…
Our article is focused on the application of Markowitz Portfolio Theory and the Single Index Model on 10-year historical monthly return data for 10 stocks included in FTSE Bursa Malaysia KLCI, which is also our market index, as well as a…
We present a simulation-and-regression method for solving dynamic portfolio allocation problems in the presence of general transaction costs, liquidity costs and market impacts. This method extends the classical least squares Monte Carlo…
We introduce a new approach for prudent risk evaluation based on stochastic dominance, which will be called the model aggregation (MA) approach. In contrast to the classic worst-case risk (WR) approach, the MA approach produces not only a…
We propose a novel risk matrix to characterize the optimal portfolio choice of an investor with tail concerns. The diagonal of the matrix contains the Value-at-Risk of each asset in the portfolio and the off-diagonal the pairwise…
An investment portfolio consists of $n$ algorithmic trading strategies, which generate vectors of positions in trading assets. Sign opposite trades (buy/sell) cross each other as strategies are combined in a portfolio. Then portfolio…
We present an exact algorithm for mean-risk optimization subject to a budget constraint, where decision variables may be continuous or integer. The risk is measured by the covariance matrix and weighted by an arbitrary monotone function,…