Related papers: Optimal Option Portfolios for Skew-Elliptical t Re…
Online portfolio selection research has so far focused mainly on minimizing regret defined in terms of wealth growth. Practical financial decision making, however, is deeply concerned with both wealth and risk. We consider online learning…
In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the…
This paper investigates the impact of environmental, social, and governance (ESG) constraint on a regularized mean-variance (MV) portfolio optimization problem in a large-dimensional setting, in which a positive definite regularization…
We consider an investor, whose portfolio consists of a single risky asset and a risk free asset, who wants to maximize his expected utility of the portfolio subject to the Value at Risk assuming a heavy tail distribution of the stock prices…
We prove that the Omega measure, which considers all moments when assessing portfolio performance, is equivalent to the widely used Sharpe ratio under jointly elliptic distributions of returns. Portfolio optimization of the Sharpe ratio is…
It is well known that the out-of-sample performance of Markowitz's mean-variance portfolio criterion can be negatively affected by estimation errors in the mean and covariance. In this paper we address the problem by regularizing the…
In this paper we discuss a general methodology to compute the market risk measure over long time horizons and at extreme percentiles, which are the typical conditions needed for estimating Economic Capital. The proposed approach extends the…
Optimal reinsurance when Value at Risk and expected surplus is balanced through their ratio is studied, and it is demonstrated how results for risk-adjusted surplus can be utilized. Simplifications for large portfolios are derived, and this…
We adopt deep learning models to directly optimise the portfolio Sharpe ratio. The framework we present circumvents the requirements for forecasting expected returns and allows us to directly optimise portfolio weights by updating model…
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…
The mean-variance model remains the most prevalent investment framework, built on diversification principles. However, it consistently struggles with estimation errors in expected returns and the covariance matrix, its core parameters. To…
Using a family of modified Weibull distributions, encompassing both sub-exponentials and super-exponentials, to parameterize the marginal distributions of asset returns and their multivariate generalizations with Gaussian copulas, we offer…
In the market place, diversification reduces risk and provides protection against extreme events by ensuring that one is not overly exposed to individual occurrences. We argue that diversification is best measured by characteristics of the…
This paper proposes a new method for financial portfolio optimization based on reducing simultaneous asset shocks across a collection of assets. This may be understood as an alternative approach to risk reduction in a portfolio based on a…
We introduce new mathematical methods to study the optimal portfolio size of investment portfolios over time, considering investors with varying skill levels. First, we explore the benefit of portfolio diversification on an annual basis for…
We provide analytical results for a static portfolio optimization problem with two coherent risk measures. The use of two risk measures is motivated by joint decision-making for portfolio selection where the risk perception of the portfolio…
We introduce a financial portfolio optimization framework that allows us to automatically select the relevant assets and estimate their weights by relying on a sorted $\ell_1$-Norm penalization, henceforth SLOPE. Our approach is able to…
Risk management is very important for individual investors or companies. There are many ways to measure the risk of investment. Prices of risky assets vary rapidly and randomly due to the complexity of finance market. Random interval is a…
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…
Under Solvency II, the Value-at-Risk (VaR) is applied, although there is broad consensus that the Expected Shortfall (ES) constitutes a more appropriate risk measure. Moving towards ES would necessitate specifying the corresponding ES…