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The present paper provides a study of high-dimensional statistical arbitrage that combines factor models with the tools from stochastic control, obtaining closed-form optimal strategies which are both interpretable and computationally…

We consider a mean-reverting stochastic volatility model which satisfies some relevant stylized facts of financial markets. We introduce an algorithm for the detection of peaks in the volatility profile, that we apply to the time series of…

Stock markets can become inefficient due to calendar anomalies known as day-of-the-week effect. Calendar anomalies are well-known in financial literature, but the phenomena remain to be explored in econophysics. In this paper we use…

In order to estimate the conditional risk of a portfolio's return, two strategies can be advocated. A multivariate strategy requires estimating a dynamic model for the vector of risk factors, which is often challenging, when at all…

Modern portfolio theory(MPT) addresses the problem of determining the optimum allocation of investment resources among a set of candidate assets. In the original mean-variance approach of Markowitz, volatility is taken as a proxy for risk,…

This paper develops a method to derive optimal portfolios and risk premia explicitly in a general diffusion model for an investor with power utility and a long horizon. The market has several risky assets and is potentially incomplete.…

In this paper we propose a new model for volatility fluctuations in financial time series. This model relies on a non-stationary gaussian process that exhibits aging behavior. It turns out that its properties, over any finite time interval,…

We consider a semilinear equation linked to the finite horizon consumption - investment problem under the stochastic factor framework and we prove it admits a classical solution and provide all obligatory estimates to successfully apply a…

Analytical, free of time consuming Monte Carlo simulations, framework for credit portfolio systematic risk metrics calculations is presented. Techniques are described that allow calculation of portfolio-level systematic risk measures…

This paper offers a precise analytical characterization of the distribution of returns for a portfolio constituted of assets whose returns are described by an arbitrary joint multivariate distribution. In this goal, we introduce a…

This paper considers mean-variance optimization under uncertainty, specifically when one desires a sparsified set of optimal portfolio weights. From the standpoint of a Bayesian investor, our approach produces a small portfolio from many…

Stochastic algorithms are among the best for solving computationally hard search and reasoning problems. The runtime of such procedures is characterized by a random variable. Different algorithms give rise to different probability…

Probabilistic forecasting is crucial in multivariate financial time-series for constructing efficient portfolios that account for complex cross-sectional dependencies. In this paper, we propose Diffolio, a diffusion model designed for…

We study the design of portfolios under a minimum risk criterion. The performance of the optimized portfolio relies on the accuracy of the estimated covariance matrix of the portfolio asset returns. For large portfolios, the number of…

The third moment variation of a financial asset return process is defined by the quadratic covariation between the return and square return processes. The skew and fat tail risk of an underlying asset can be hedged using a third moment…

This paper describes a general approach for stochastic modeling of assets returns and liability cash-flows of a typical pensions insurer. On the asset side, we model the investment returns on equities and various classes of fixed-income…

We provide analytical results for a static portfolio optimization problem with two coherent risk measures. The use of two risk measures is motivated by joint decision-making for portfolio selection where the risk perception of the portfolio…

We analyze the stability of financial investment networks, where financial institutions hold overlapping portfolios of assets. We consider the effect of portfolio diversification and heterogeneous investments using a random matrix dynamical…

This study examines portfolio selection using predictive models for portfolio returns. Portfolio selection is a fundamental task in finance, and a variety of methods have been developed to achieve this goal. For instance, the mean-variance…

Recent work has emphasized the diversification benefits of combining trend signals across multiple horizons, with the medium-term window-typically six months to one year-long viewed as the "sweet spot" of trend-following. This paper…