Related papers: Investing Is Compression
We introduce a robust variant of the Kelly portfolio optimization model, called the Wasserstein-Kelly portfolio optimization. Our model, taking a Wasserstein distributionally robust optimization (DRO) formulation, addresses the fundamental…
Probabilistic settings (e.g., vanishing-error channel coding) and non-probabilistic settings (e.g., zero-error channel coding and adversarial channels) were considered two related but different branches of information theory which do not…
We study a practical optimization problems for venture capital investments and/or Research and Development (R&D) investments. The first problem is that, given the amount of the initial investment and the reward function at the initial…
In this paper, motivated by the celebrated work of Kelly, we consider the problem of portfolio weight selection to maximize expected logarithmic growth. Going beyond existing literature, our focal point here is the rebalancing frequency…
We deal with the \textit{selective classification} problem (supervised-learning problem with a rejection option), where we want to achieve the best performance at a certain level of coverage of the data. We transform the original $m$-class…
Turnpike theorems state that if an investor's utility is asymptotically equivalent to a power utility, then the optimal investment strategy converges to the CRRA strategy as the investment horizon tends to infinity. This paper aims to…
In financial investing, universal portfolios are a means of constructing portfolios which guarantee a certain level of performance relative to a baseline, while making no statistical assumptions about the future market data. They fall under…
The ability to find short representations, i.e. to compress data, is crucial for many intelligent systems. We present a theory of incremental compression showing that arbitrary data strings, that can be described by a set of features, can…
Kelly's criterion is a betting strategy that maximizes the long term growth rate, but which is known to be risky. Here, we find optimal betting strategies that gives the highest capital growth rate while keeping a certain low value of risky…
We consider an insurance company whose surplus is represented by the classical Cramer-Lundberg process. The company can invest its surplus in a risk free asset and in a risky asset, governed by the Black-Scholes equation. There is a…
We consider an abstraction of computational security in password protected systems where a user draws a secret string of given length with i.i.d. characters from a finite alphabet, and an adversary would like to identify the secret string…
We study the risk criterion for investments based on the drawdown from the maximal value of the capital in the past. Depending on investor's risk attitude, thus his risk exposure, we find that the distribution of these drawdowns follows a…
This paper is concerned with the axiomatic foundation and explicit construction of a general class of optimality criteria that can be used for investment problems with multiple time horizons, or when the time horizon is not known in…
We study financial networks where banks are connected through bilateral liabilities and may default when resources are insufficient to meet obligations. We consider both the standard proportional clearing model and a priority-proportional…
In portfolio compression, market participants (banks, organizations, companies, financial agents) sign contracts, creating liabilities between each other, which increases the systemic risk. Large, dense markets commonly can be compressed by…
For independent multi-outcome events under multiplicative parlay pricing, we give a short exact proof of the optimal Kelly strategy using the implicit-cash viewpoint. The proof is entirely eventwise. One first solves each event in…
We consider an irreversible investment problem under incomplete information, where the investor decides whether and when to make investments in a project. Upon investment, the investor acquires previously hidden information from the…
We formulate an adaptive version of Kelly's horse model in which the gambler learns from past race results using Bayesian inference. A known asymptotic scaling for the difference between the growth rate of the gambler and the optimal growth…
This paper introduces a comprehensive framework for Financial Information Theory by applying information-theoretic concepts such as entropy, Kullback-Leibler divergence, mutual information, normalized mutual information, and transfer…
This paper builds a core-satellite model of semi-static Kelly betting and log-optimal investment. We study the problem of a saver whose core portfolio consists in unlevered (1x) retirement plans with no access to margin debt. However, the…