Related papers: The Sherman-Morrison-Markowitz Portfolio
In this paper, we explore the portfolio allocation problem involving an uncertain covariance matrix. We calculate the expected value of the Constant Absolute Risk Aversion (CARA) utility function, marginalized over a distribution of…
We consider a group of mean-variance investors with mimicking desire such that each investor is willing to penalize deviations of his portfolio composition from compositions of other group members. Penalizing norm constraints are already…
This is a follow up of our previous paper - Trybu{\l}a and Zawisza \cite{TryZaw}, where we considered a modification of a monotone mean-variance functional in continuous time in stochastic factor model. In this article we address the…
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…
In this paper, we consider a new problem of portfolio optimization using stochastic information. In a setting where there is some uncertainty, we ask how to best select $k$ potential solutions, with the goal of optimizing the value of the…
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…
We estimate the global minimum variance (GMV) portfolio in the high-dimensional case using results from random matrix theory. This approach leads to a shrinkage-type estimator which is distribution-free and it is optimal in the sense of…
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…
We consider continuous-time mean-variance portfolio selection with bankruptcy prohibition under convex cone portfolio constraints. This is a long-standing and difficult problem not only because of its theoretical significance, but also for…
This paper first describes a class of uncertain stochastic control systems with Markovian switching, and derives an It\^o-Liu formula for Markov-modulated processes. And we characterize an optimal control law, which satisfies the…
We revisit the Bayesian Black-Litterman (BL) portfolio model and remove its reliance on subjective investor views. Classical BL requires an investor "view": a forecast vector $q$ and its uncertainty matrix $\Omega$ that describe how much a…
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 conventional wisdom of mean-variance (MV) portfolio theory asserts that the nature of the relationship between risk and diversification is a decreasing asymptotic function, with the asymptote approximating the level of portfolio…
In this paper, we revisit the portfolio optimization problems of the minimization/maximization of investment risk under constraints of budget and investment concentration (primal problem) and the maximization/minimization of investment…
In this study, we have investigated empirically the effects of market properties on the degree of diversification of investment weights among stocks in a portfolio. The weights of stocks within a portfolio were determined on the basis of…
We derive properties of the cdf of random variables defined as saddle-type points of real valued continuous stochastic processes. This facilitates the derivation of the first-order asymptotic properties of tests for stochastic spanning…
The paper solves the problem of optimal portfolio choice when the parameters of the asset returns distribution, like the mean vector and the covariance matrix are unknown and have to be estimated by using historical data of the asset…
We investigate a portfolio selection problem involving multi competitive agents, each exhibiting mean-variance preferences. Unlike classical models, each agent's utility is determined by their relative wealth compared to the average wealth…
This study investigates three central questions in portfolio optimization. First, whether time-varying moment estimators outperform conventional sample estimators in practical portfolio construction. Second, whether incorporating a turnover…
Entropy based ideas find wide-ranging applications in finance for calibrating models of portfolio risk as well as options pricing. The abstracted problem, extensively studied in the literature, corresponds to finding a probability measure…