Related papers: Optimal Portfolio Compression for Priority-Proport…
The 2008 financial crisis has been attributed to "excessive complexity" of the financial system due to financial innovation. We employ computational complexity theory to make this notion precise. Specifically, we consider the problem of…
In this paper, we present an artificial neural network framework for portfolio compression of a large portfolio of European options with varying maturities (target portfolio) by a significantly smaller portfolio of European options with…
We consider an investor facing a classical portfolio problem of optimal investment in a log-Brownian stock and a fixed-interest bond, but constrained to choose portfolio and consumption strategies that reduce a dynamic shortfall risk…
A new procedure is presented for the objective comparison and evaluation of default definitions. This allows the lender to find a default threshold at which the financial loss of a loan portfolio is minimised, in accordance with Basel II.…
We consider a portfolio optimization problem in a defaultable market with finitely-many economical regimes, where the investor can dynamically allocate her wealth among a defaultable bond, a stock, and a money market account. The market…
This paper proposes a novel dynamical model for determining clearing payments in financial networks. We extend the classical Eisenberg-Noe model of financial contagion to multiple time periods, allowing financial operations to continue…
Portfolio optimization methods suffer from a catalogue of known problems, mainly due to the facts that pair correlations of asset returns are unstable, and that extremal risk measures such as maximum drawdown are difficult to predict due to…
A drawdown constraint forces the current wealth to remain above a given function of its maximum to date. We consider the portfolio optimisation problem of maximising the long-term growth rate of the expected utility of wealth subject to a…
Excessive leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be…
We consider the problem of determining a sequence of payments among a set of entities that clear (if possible) the liabilities among them. We formulate this as an optimal control problem, which is convex when the objective function is, and…
In this paper, we consider a financial market with assets exposed to some risks inducing jumps in the asset prices, and which can still be traded after default times. We use a default-intensity modeling approach, and address in this…
Markov Decision Processes (MDPs) are stochastic optimization problems that model situations where a decision maker controls a system based on its state. Partially observed Markov decision processes (POMDPs) are generalizations of MDPs where…
The dynamic portfolio optimization problem in finance frequently requires learning policies that adhere to various constraints, driven by investor preferences and risk. We motivate this problem of finding an allocation policy within a…
Collateral optimization refers to the systematic allocation of financial assets to satisfy obligations or secure transactions, while simultaneously minimizing costs and optimizing the usage of available resources. {This involves assessing…
Systemic risk arises as a multi-layer network phenomenon. Layers represent direct financial exposures of various types, including interbank liabilities, derivative- or foreign exchange exposures. Another network layer of systemic risk…
In distributed optimization, the communication of model updates can be a performance bottleneck. Consequently, gradient compression has been proposed as a means of increasing optimization throughput. In general, due to information loss,…
This paper addresses two central problems for probabilistic processing models: parameter estimation from incomplete data and efficient retrieval of most probable analyses. These questions have been answered satisfactorily only for…
In many problems, the inputs arrive over time, and must be dealt with irrevocably when they arrive. Such problems are online problems. A common method of solving online problems is to first solve the corresponding linear program, and then…
The network-based study of financial systems has received considerable attention in recent years but has seldom explicitly incorporated the dynamic aspects of such systems. We consider this problem setting from the temporal point of view…
Optimal execution of a portfolio have been a challenging problem for institutional investors. Traders face the trade-off between average trading price and uncertainty, and traditional methods suffer from the curse of dimensionality. Here,…