Related papers: Multifractal returns and Hierarchical Portfolio Th…
Multivariate time series forecasting is widely used in various fields. Reasonable prediction results can assist people in planning and decision-making, generate benefits and avoid risks. Normally, there are two characteristics of time…
In structural credit risk models, default events and the ensuing losses are both derived from the asset values at maturity. Hence it is of utmost importance to choose a distribution for these asset values which is in accordance with…
Using high frequency data, we have studied empirically the change of volatility, also called volatility derivative, for various time horizons. In particular, the correlation between the volatility derivative and the volatility realized in…
Operational risk is challenging to quantify because of the broad range of categories (fraud, technological issues, natural disasters) and the heavy-tailed nature of realized losses. Operational risk modeling requires quantifying how these…
We present a comparative analysis of multifractal properties of financial time series built on stock indices from developing (WIG) and developed (S&P500) financial markets. It is shown how the multifractal image of the market is altered…
We consider an investor, whose portfolio consists of a single risky asset and a risk free asset, who wants to maximize his expected utility of the portfolio subject to the Value at Risk assuming a heavy tail distribution of the stock prices…
The scaling properties of the time series of asset prices and trading volumes of stock markets are analysed. It is shown that similarly to the asset prices, the trading volume data obey multi-scaling length-distribution of low-variability…
This note discusses some of the aspects of a model for the covariance of equity returns based on a simple "isotropic" structure in which all pairwise correlations are taken to be the same value. The effect of the structure on feasible…
The portfolio optimization problem in which the variances of the return rates of assets are not identical is analyzed in this paper using the methodology of statistical mechanical informatics, specifically, replica analysis. We define two…
This paper derives a portfolio decomposition formula when the agent maximizes utility of her wealth at some finite planning horizon. The financial market is complete and consists of multiple risky assets (stocks) plus a risk free asset. The…
The idiosyncratic (microscopic) and systemic (macroscopic) components of market structure have been shown to be responsible for the departure of the optimal mean-variance allocation from the heuristic `equally-weighted' portfolio. In this…
We study the problem of optimal long term portfolio selection with a view to beat a benchmark. Two kinds of objectives are considered. One concerns the probability of outperforming the benchmark and seeks either to minimise the decay rate…
We propose a novel conditional diffusion model for contextual portfolio optimization that learns the cross-sectional distribution of next-day stock returns conditioned on high-dimensional asset-specific factors. Our model leverages a…
There is more and more empirical evidence that multifractality constitutes another and perhaps the most significant financial stylized fact. A realistic model of the financial dynamics should therefore incorporate this effect. The most…
As the cornerstone of modern portfolio theory, Markowitz's mean-variance optimization is considered a major model adopted in portfolio management. However, due to the difficulty of estimating its parameters, it cannot be applied to all…
For a long investment time horizon, it is preferable to rebalance the portfolio weights at intermediate times. This necessitates a multi-period market model in which portfolio optimization is usually done through dynamic programming.…
Multifractal analysis is a forecasting technique used to study the scaling regularity properties of financial returns, to analyze the long-term memory and predictability of financial markets. In this paper, we propose a novel structural…
This paper is concerned with portfolio selection for an investor with power utility in multi-asset financial markets in a rough stochastic environment. We investigate Merton's portfolio problem for different multivariate Volterra models,…
In this paper, we propose a new class of optimization problems, which maximize the terminal wealth and accumulated consumption utility subject to a mean variance criterion controlling the final risk of the portfolio. The multiple-objective…
Portfolio optimization approaches inevitably rely on multivariate modeling of markets and the economy. In this paper, we address three sources of error related to the modeling of these complex systems: 1. oversimplifying hypothesis; 2.…