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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 give a detailed account of correlations between credit sector/quality and treasury curve factors, using the robust framework of the Barclays POINT Global Risk Model. Consistent with earlier studies, we find a strong negative correlation…
We consider the problem of accurately measuring the credit risk of a portfolio consisting of loss exposures such as loans, bonds and other financial assets. We are particularly interested in the probability of large portfolio losses. We…
Classical portfolio optimization methods typically determine an optimal capital allocation through the implicit, yet critical, assumption of statistical time-invariance. Such models are inadequate for real-world markets as they employ…
Every "x"-adjustment in the so-called xVA financial risk management framework relies on the computation of exposures. Considering thousands of Monte Carlo paths and tens of simulation steps, a financial portfolio needs to be evaluated…
A portfolio of different stocks and a risk-less security whose composition is dynamically maintained stable by trading shares at any time step leads to a growth of the capital with a nonrandom rate. This is the key for the theory of…
This paper presents a global trajectory optimization framework for minimizing lap time in autonomous racing under uncertain vehicle dynamics. Optimizing the trajectory over the full racing horizon is computationally expensive, and tracking…
We propose a novel model to achieve superior out-of-sample Sharpe ratios. While most research in asset allocation focuses on estimating the return vector and covariance matrix, the first component of our novel model instead forecasts the…
For the past two decades investors have observed long memory and highly correlated behavior of asset classes that does not fit into the framework of Modern Portfolio Theory. Custom correlation and standard deviation estimators consider…
Trading strategies that were profitable in the past often degrade with time. Since unlucky streaks can also hit "healthy" strategies, how can one detect that something truly worrying is happening? It is intuitive that a drawdown that lasts…
This paper addresses the estimation of a time- varying parameter in a network. A group of agents sequentially receive noisy signals about the parameter (or moving target), which does not follow any particular dynamics. The parameter is not…
We consider the hedging error of a derivative due to discrete trading in the presence of a drift in the dynamics of the underlying asset. We suppose that the trader wishes to find rebalancing times for the hedging portfolio which enable him…
We propose a hybrid model of portfolio credit risk where the dynamics of the underlying latent variables is governed by a one factor GARCH process. The distinctive feature of such processes is that the long-term aggregate return…
This paper studies conditional allocation between a growth/technology ETF basket, denoted by $G$, and a defensive income/value-oriented ETF basket, denoted by $D$. The objective is not to discover a new standalone alpha factor, but to…
Portfolio optimization involves selecting asset weights to minimize a risk-reward objective, such as the portfolio variance in the classical minimum-variance framework. Sparse portfolio selection extends this by imposing a cardinality…
In the present work we address the problem of evaluating the historical performance of a trading strategy or a certain portfolio of assets. Common indicators such as the Sharpe ratio and the risk adjusted return have significant drawbacks.…
Portfolio Management is the process of overseeing a group of investments, referred to as a portfolio, with the objective of achieving predetermined investment goals. Portfolio optimization is a key component that involves allocating the…
In this paper, we introduce a new single model maneuvering target tracking approach using stochastic differential equation (SDE) based on GARCH volatility. The traditional input estimation (IE) techniques assume constant acceleration level…
This paper investigates risk measures derived from the expected maximum deficit in a continuous-time framework and develops optimal reserve allocation strategies across multiple lines of business. We formalize the expected maximum deficit…
This study introduces a novel approach to walk-forward optimization by parameterizing the lengths of training and testing windows. We demonstrate that the performance of a trading strategy using the Exponential Moving Average (EMA)…