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This article examines arbitrage investment in a mispriced asset when the mispricing follows the Ornstein-Uhlenbeck process and a credit-constrained investor maximizes a generalization of the Kelly criterion. The optimal differentiable and…
We consider an agent who has access to a financial market, including derivative contracts, who looks to maximise her utility. Whilst the agent looks to maximise utility over one probability measure, or class of probability measures, she…
We obtain a lower asymptotic bound on the decay rate of the probability of a portfolio's underperformance against a benchmark over a large time horizon. It is assumed that the prices of the securities are governed by geometric Brownian…
We consider an optimal investment and consumption problem for a Black-Scholes financial market with stochastic coefficients driven by a diffusion process. We assume that an agent makes consumption and investment decisions based on CRRA…
This paper studies a type of periodic utility maximization problems for portfolio management in incomplete stochastic factor models with convex trading constraints. The portfolio performance is periodically evaluated on the relative ratio…
In deep reinforcement learning, policy optimization methods need to deal with issues such as function approximation and the reuse of off-policy data. Standard policy gradient methods do not handle off-policy data well, leading to premature…
Motivated by the current global high inflation scenario, we aim to discover a dynamic multi-period allocation strategy to optimally outperform a passive benchmark while adhering to a bounded leverage limit. To this end, we formulate an…
In this paper we model benchmark beating with the increasing convex order (ICX order). The mean constraint in the mean-variance theory of portfolio selection can be regarded as beating a constant. We then investigate the problem of…
We consider classical Merton problem of terminal wealth maximization in finite horizon. We assume that the drift of the stock is following Ornstein-Uhlenbeck process and the volatility of it is following GARCH(1) process. In particular,…
The problem of estimation error in portfolio optimization is discussed, in the limit where the portfolio size N and the sample size T go to infinity such that their ratio is fixed. The estimation error strongly depends on the ratio N/T and…
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 investigate an expected utility maximization problem under model uncertainty in a one-period financial market. We capture model uncertainty by replacing the baseline model $\mathbb{P}$ with an adverse choice from a Wasserstein ball of…
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…
This paper investigates a time-inconsistent portfolio selection problem in the incomplete mar ket model, integrating expected utility maximization with risk control. The objective functional balances the expected utility and variance on log…
Portfolio selection problems that optimize expected utility are usually difficult to solve. If the number of assets in the portfolio is large, such expected utility maximization problems become even harder to solve numerically. Therefore,…
We study optimal investment in a financial market having a finite number of assets from a signal processing perspective. We investigate how an investor should distribute capital over these assets and when he should reallocate the…
In stochastic portfolio theory, a relative arbitrage is an equity portfolio which is guaranteed to outperform a benchmark portfolio over a finite horizon. When the market is diverse and sufficiently volatile, and the benchmark is the market…
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…
\begin{abstract} In this paper, we integrated the statistical arbitrage strategy, pairs trading, into the Black-Litterman model and constructed efficient mean-variance portfolios. Typically, pairs trading underperforms under volatile or…
This paper investigates the optimal management of an aggregated defined benefit pension plan in a stochastic environment. The interest rate follows the Ornstein-Uhlenbeck model, the benefits follow the geometric Brownian motion while the…