Related papers: Extensions to the Wealth Tax Neutrality Framework
In behavioral finance, aversion affects investors' judgment of future uncertainty when profit and loss occur. Considering investors' aversion to loss and risk, and the ambiguous uncertainty characterizing asset returns, we construct a…
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…
This paper revisits mean-risk portfolio selection in a one-period financial market, where risk is quantified by a star-shaped risk measure $\rho$. We make three contributions. First, we introduce the new axiom of sensitivity to large…
Portfolio optimization has been a central problem in finance, often approached with two steps: calibrating the parameters and then solving an optimization problem. Yet, the two-step procedure sometimes encounter the "error maximization"…
Modern Portfolio Theory (MPT) prescribes how to maximise the return of an asset portfolio for a given level of risk. The optimal trade-off between return and variance defines the efficient frontier. Whether actual cryptoasset portfolios…
We propose a method for extending a given asset pricing formula to account for two additional sources of risk: the risk associated with future changes in market--calibrated parameters and the remaining risk associated with idiosyncratic…
This article develops a model that takes into account skewness risk in risk parity portfolios. In this framework, asset returns are viewed as stochastic processes with jumps or random variables generated by a Gaussian mixture distribution.…
We develop a general theory of risk measures that determines the optimal amount of capital to raise and invest in a portfolio of reference traded securities in order to meet a pre-specified regulatory requirement. The distinguishing feature…
We maximize the expected utility of terminal wealth in an incomplete market where there are cone constraints on the investor's portfolio process and the utility function is not assumed to be strictly concave or differentiable. We establish…
Research in quantitative finance has demonstrated that reinforcement learning (RL) methods have delivered promising outcomes in the context of hedging financial portfolios. For example, hedging a portfolio of European options using RL…
The deviation of the efficient market hypothesis (EMH) for the practical economic system allows us gain the arbitrary or risk premium in finance markets. We propose the triplet $(R,H,\sigma)$ theory to give the local and global optimal…
This paper studies Merton's problem in an extended formulation by incorporating the benchmark tracking on the wealth process. We consider a tracking formulation where the fund manager aims to maximize the trade-off between the expected…
The financial model proposed involves the liquidation process of a portfolio of $n$ assets through sell or (and) buy orders with volatility. We present the rigorous mathematical formulation of this model in a financial setting resulting to…
This study measures the long memory of investor-segregated cash flows within the Korean equity market from 2015 to 2024. Applying detrended fluctuation analysis (DFA) to BUY, SELL, and NET aggregates, we estimate the Hurst exponent ($H$)…
Designing dynamic portfolio insurance strategies under market conditions switching between two or more regimes is a challenging task in financial economics. Recently, a promising approach employing the value-at-risk (VaR) measure to assign…
This paper investigates the valuation of variable annuity contracts with an early surrender option under non-Markovian models. Moreover, policyholders are provided with guaranteed minimum maturity and death benefits to protect against the…
We introduce a method to estimate simultaneously the tail and the threshold parameters of an extreme value regression model. This standard model finds its use in finance to assess the effect of market variables on extreme loss distributions…
Estimating the covariance of asset returns, i.e., the risk model, is a key component of financial portfolio construction and evaluation. Most risk modeling approaches produce a factor model that decomposes the asset variability into two…
A model of distribution of the wealth in a society based on the properties of complex networks has been proposed. The wealth is interpreted as a consequence of communication possibilities and proportional to the number of connections…
We present a framework for modeling asset and portfolio dynamics, incorporating this information into portfolio optimization. For this framework, we introduce the Commonality Principle, providing a solution for the optimal selection of…