Related papers: Extensions to the Wealth Tax Neutrality Framework
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 study portfolio selection with a Conditional Value-at-Risk (CVaR) constraint under distribution shift and serial dependence. While Wasserstein distributionally robust optimization (DRO) offers tractable protection via an ambiguity ball…
CRRA utility where the risk aversion coefficient is a constant is commonly seen in various economics models. But wealth-driven risk aversion rarely shows up in investor's investment problems. This paper mainly focus on numerical solutions…
Current approaches to fair valuation in insurance often follow a two-step approach, combining quadratic hedging with application of a risk measure on the residual liability, to obtain a cost-of-capital margin. In such approaches, the…
This paper addresses a novel \emph{cost-sensitive} distributionally robust log-optimal portfolio problem, where the investor faces \emph{ambiguous} return distributions, and a general convex transaction cost model is incorporated. The…
The quest for diversification has led to an increasing number of complex funds with a high number of strategies and non-linear payoffs. The new generation of Alternative Risk Premia (ARP) funds are an example that has been very popular in…
The classical mean-variance framework characterizes portfolio risk solely through return variance and the covariance matrix, implicitly assuming that all relevant sources of risk are captured by second moments. In modern financial markets,…
For an investor with constant absolute risk aversion and a long horizon, who trades in a market with constant investment opportunities and small proportional transaction costs, we obtain explicitly the optimal investment policy, its implied…
A new framework for portfolio diversification is introduced which goes beyond the classical mean-variance approach and portfolio allocation strategies such as risk parity. It is based on a novel concept called portfolio dimensionality that…
It is well established that in a market with inclusion of a risk-free asset the single-period mean-variance efficient frontier is a straight line tangent to the risky region, a fact that is the very foundation of the classical CAPM. In this…
Explicit robust hedging strategies for convex or concave payoffs under a continuous semimartingale model with uncertainty and small transaction costs are constructed. In an asymptotic sense, the upper and lower bounds of the cumulative…
Mean-reverting portfolios with volatility and sparsity constraints are of prime interest to practitioners in finance since they are both profitable and well-diversified, while also managing risk and minimizing transaction costs. Three main…
We introduce a covariance matrix estimator that both takes into account the heteroskedasticity of financial returns (by using an exponentially weighted moving average) and reduces the effective dimensionality of the estimation (and hence…
We extend the classical mean-variance (MV) framework and propose a robust and sparse portfolio selection model incorporating an ellipsoidal uncertainty set to reduce the impact of estimation errors and fixed transaction costs to penalize…
This paper studies robust forward investment and consumption preferences and optimal strategies for a risk-averse and ambiguity-averse agent in an incomplete financial market with drift and volatility uncertainties. We focus on non-zero…
We study soft persistence (existence in subsequent temporal layers of motifs from the initial layer) of motif structures in Triangulated Maximally Filtered Graphs (TMFG) generated from time-varying Kendall correlation matrices computed from…
To achieve robustness of risk across different assets, risk parity investing rules, a particular state of risk contributions, have grown in popularity over the previous few decades. To generalize the concept of risk contribution from the…
We present a framework for hedging a portfolio of derivatives in the presence of market frictions such as transaction costs, market impact, liquidity constraints or risk limits using modern deep reinforcement machine learning methods. We…
Many models of market dynamics make use of the idea of conservative wealth exchanges among economic agents. A few years ago an exchange model using extremal dynamics was developed and a very interesting result was obtained: a self-generated…
In this paper, we provide extended convolution bounds for the Fr\'{e}chet problem and discuss related implications in quantitative risk management. First, we establish a new form of inequality for the Range-Value-at-Risk (RVaR). Based on…