Related papers: Unwitting Markowitz' Simplification of Portfolio R…

Fixed income has received far less attention than equity portfolio optimisation since Markowitz' original work of 1952, partly as a result of the need to model rates and credit risk. We argue that the shape of the efficient frontier is…

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…

Recent studies stressed the fact that covariance matrices computed from empirical financial time series appear to contain a high amount of noise. This makes the classical Markowitz Mean-Variance Optimization model unable to correctly…

A new methodology has been introduced to clean the correlation matrix of single stocks returns based on a constrained principal component analysis using financial data. Portfolios were introduced, namely "Fundamental Maximum Variance…

We present an empirical study of the subordination hypothesis for a stochastic time series of a stock price. The fluctuating rate of trading is identified with the stochastic variance of the stock price, as in the continuous-time random…

In many insurance contexts, dependence between risks of a portfolio may arise from their frequencies. We investigate a dependent risk model in which we assume the vector of count variables to be a tree-structured Markov random field with…

For the pedestrian observer, financial markets look completely random with erratic and uncontrollable behavior. To a large extend, this is correct. At first approximation the difference between real price changes and the random walk model…

This paper studies the multi-period mean-variance portfolio allocation problem with transaction costs. Many methods have been proposed these last years to challenge the famous uni-period Markowitz strategy.But these methods cannot integrate…

We describe a procedure to perform approximate inference on the achieved signal-noise ratio of the Markowitz Portfolio under Gaussian i.i.d. returns. The procedure relies on a statistic similar to the Sharpe Ratio Information Criterion.…

We consider a multi-stock continuous time incomplete market model with random coefficients. We study the investment problem in the class of strategies which do not use direct observations of the appreciation rates of the stocks, but rather…

We consider a single-period portfolio selection problem for an investor, maximizing the expected ratio of the portfolio utility and the utility of a best asset taken in hindsight. The decision rules are based on the history of stock returns…

In this paper, we tackle the dynamic mean-variance portfolio selection problem in a {\it model-free} manner, based on (generative) diffusion models. We propose using data sampled from the real model $\mathbb P$ (which is unknown) with…

Mean-reverting assets are one of the holy grails of financial markets: if such assets existed, they would provide trivially profitable investment strategies for any investor able to trade them, thanks to the knowledge that such assets…

In this paper, the mean-variance portfolio selection problem with Poisson jumps are studied, where the recursive utility is given by the solution to a backward stochastic differential equation with Poisson jumps. Both the maximum principle…

What return should you expect when you take on a given amount of risk? How should that return depend upon other people's behavior? What principles can you use to answer these questions? In this paper, we approach these topics by exploring…

The Markowitz model is still the cornerstone of modern portfolio theory. In particular, when focusing on the minimum-variance portfolio, the covariance matrix or better its inverse, the so-called precision matrix, is the only input…

We construct a deep portfolio theory. By building on Markowitz's classic risk-return trade-off, we develop a self-contained four-step routine of encode, calibrate, validate and verify to formulate an automated and general portfolio…

We consider an investor facing a classical portfolio problem of optimal investment in a log-Brownian stock and a fixed-interest bond, but constrained to choose portfolio and consumption strategies that reduce a dynamic shortfall risk…

We consider the problem of managing a portfolio of moving-band statistical arbitrages (MBSAs), inspired by the Markowitz optimization framework. We show how to manage a dynamic basket of MBSAs, and illustrate the method on recent historical…

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…