Related papers: Novel Risk Measures for Portfolio Optimization Usi…
We study a static portfolio optimization problem with two risk measures: a principle risk measure in the objective function and a secondary risk measure whose value is controlled in the constraints. This problem is of interest when it is…
This paper presents how the most recent improvements made on covariance matrix estimation and model order selection can be applied to the portfolio optimisation problem. The particular case of the Maximum Variety Portfolio is treated but…
This paper is concerned with portfolio optimization models for creating high-quality lists of recommended items to balance the accuracy and diversity of recommendations. However, the statistics (i.e., expectation and covariance of ratings)…
In this paper, we investigate the features and the performance of the Risk Parity (RP) portfolios using the Mean Absolute Deviation (MAD) as a risk measure. The RP model is a recent strategy for asset allocation that aims at equally sharing…
Classical mean-variance portfolio theory tells us how to construct a portfolio of assets which has the greatest expected return for a given level of return volatility. Utility theory then allows an investor to choose the point along this…
Modeling and managing portfolio risk is perhaps the most important step to achieve growing and preserving investment performance. Within the modern portfolio construction framework that built on Markowitz's theory, the covariance matrix of…
In this paper, we propose a general bi-objective model for portfolio selection, aiming to maximize both a diversification measure and the portfolio expected return. Within this general framework, we focus on maximizing a diversification…
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…
Stock price prediction is a challenging task and a lot of propositions exist in the literature in this area. Portfolio construction is a process of choosing a group of stocks and investing in them optimally to maximize the return while…
We study the design of portfolios under a minimum risk criterion. The performance of the optimized portfolio relies on the accuracy of the estimated covariance matrix of the portfolio asset returns. For large portfolios, the number of…
We briefly review the approach to optimization of portfolios according to the theory of Markowitz and propose a further modification that can improve the outcome of the optimization process. The modification takes account of the entropic…
Portfolio optimization is a ubiquitous problem in financial mathematics that relies on accurate estimates of covariance matrices for asset returns. However, estimates of pairwise covariance could be better and calculating time-sensitive…
It is shown that the axioms for coherent risk measures imply that whenever there is an asset in a portfolio that dominates the others in a given sample (which happens with finite probability even for large samples), then this portfolio…
Portfolio optimization methods suffer from a catalogue of known problems, mainly due to the facts that pair correlations of asset returns are unstable, and that extremal risk measures such as maximum drawdown are difficult to predict due to…
The majority of standard approaches to financial portfolio optimization (PO) are based on the mean-variance (MV) framework. Given a risk aversion coefficient, the MV procedure yields a single portfolio that represents the optimal trade-off…
The classical Markowitz mean-variance model uses variance as a risk measure and calculates frontier portfolios in closed form by using standard optimization techniques. For general mean-risk models such closed form optimal portfolios are…
Finding an optimal balance between risk and returns in investment portfolios is a central challenge in quantitative finance, often addressed through Markowitz portfolio theory (MPT). While traditional portfolio optimization is carried out…
Asset allocation is an investment strategy that aims to balance risk and reward by constantly redistributing the portfolio's assets according to certain goals, risk tolerance, and investment horizon. Unfortunately, there is no simple…
Traditional Markowitz portfolio optimization constrains daily portfolio variance to a target value, optimising returns, Sharpe or variance within this constraint. However, this approach overlooks the relationship between variance at…
We study the problem of active portfolio management where an investor aims to outperform a benchmark strategy's risk profile while not deviating too far from it. Specifically, an investor considers alternative strategies whose terminal…