Related papers: The Sherman-Morrison-Markowitz Portfolio
The use of improved covariance matrix estimators as an alternative to the sample estimator is considered an important approach for enhancing portfolio optimization. Here we empirically compare the performance of 9 improved covariance…
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…
The paper concerns primal and dual representations as well as time consistency of set-valued dynamic risk measures. Set-valued risk measures appear naturally when markets with transaction costs are considered and capital requirements can be…
Markowitz's criterion aims to balance expected return and risk when optimizing the portfolio. The expected return level is usually fixed according to the risk appetite of an investor, then the risk is minimized at this fixed return level.…
The paper [12] examines a concept of equilibrium policies instead of optimal controls in stochastic optimization to analyze a mean-variance portfolio selection problem. We follow the same approach in order to investigate the Merton…
The Sharpe ratio is an important and widely-used risk-adjusted return in financial engineering. In modern portfolio management, one may require an m-sparse (no more than m active assets) portfolio to save managerial and financial costs.…
We study a continuous-time portfolio optimization problem under an explicit constraint on the Deviation Conditional Value-at-Risk (DCVaR), defined as the difference between the CVaR and the expected terminal wealth. While the mean-CVaR…
In this paper, we investigate the Merton portfolio management problem in the context of non-exponential discounting. This gives rise to time-inconsistency of the decision-maker. If the decision-maker at time t=0 can commit his/her…
In the present paper, using a replica analysis, we examine the portfolio optimization problem handled in previous work and discuss the minimization of investment risk under constraints of budget and expected return for the case that the…
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.…
We consider a semilinear equation linked to the finite horizon consumption - investment problem under the stochastic factor framework and we prove it admits a classical solution and provide all obligatory estimates to successfully apply a…
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)…
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…
This paper addresses the importance of incorporating various risk measures in portfolio management and proposes a dynamic hybrid portfolio optimization model that combines the spectral risk measure and the Value-at-Risk in the mean-variance…
We consider the mean--variance portfolio optimization problem under the game theoretic framework and without risk-free assets. The problem is solved semi-explicitly by applying the extended Hamilton--Jacobi--Bellman equation. Although the…
We investigate the portfolio selection problem against the systemic risk which is measured by CoVaR. We first demonstrate that the systemic risk of pure stock portfolios is essentially uncontrollable due to the contagion effect and the…
We propose a novel portfolio selection approach that manages to ease some of the problems that characterise standard expected utility maximisation. The optimal portfolio is no longer defined as the extremum of a suitably chosen utility…
The idiosyncratic (microscopic) and systemic (macroscopic) components of market structure have been shown to be responsible for the departure of the optimal mean-variance allocation from the heuristic `equally-weighted' portfolio. In this…
The potential benefits of portfolio diversification have been known to investors for a long time. Markowitz (1952) suggested the seminal approach for optimizing the portfolio problem based on finding the weights as budget shares that…
We investigate the optimal investment-reinsurance problem for insurance company with partial information on the market price of the risk. Through the use of filtering techniques we convert the original optimization problem involving…