Related papers: Optimal Investment Horizons
``Localization'' has proven to be a valuable tool in the Statistical Learning literature as it allows sharp risk bounds in terms of the problem geometry. Localized bounds seem to be much less exploited in the Stochastic Optimization…
The aim of this work consists in the study of the optimal investment strategy for a behavioural investor, whose preference towards risk is described by both a probability distortion and an S-shaped utility function. Within a continuous-time…
A new approach is presented to describe the change in the statistics of the log return distribution of financial data as a function of the timescale. To this purpose a measure is introduced, which quantifies the distance of a considered…
We consider an investor who seeks to maximize her expected utility derived from her terminal wealth relative to the maximum performance achieved over a fixed time horizon, and under a portfolio drawdown constraint, in a market with local…
A geometric analysis of the time series of returns has been performed in the past and it implied that the most of the systematic information of the market is contained in a space of small dimension. Here we have explored subspaces of this…
This paper researches the problem of purchasing deferred term insurance in the context of financial planning to maximize the probability of achieving a personal financial goal. Specifically, our study starts from the perspective of hedging…
In the world of modern financial theory, portfolio construction has traditionally operated under at least one of two central assumptions: the constraints are derived from a utility function and/or the multivariate probability distribution…
This paper introduces a flexible framework for the estimation of the conditional tail index of heavy tailed distributions. In this framework, the tail index is computed from an auxiliary linear regression model that facilitates estimation…
We consider the portfolio choice problem for a long-run investor in a general continuous semimartingale model. We suggest to use path-wise growth optimality as the decision criterion and encode preferences through restrictions on the class…
We introduce a new actuarial tail-shape index, the $\theta$-index, based on a probability equal level relationship between Value at Risk and Expected Shortfall. The index is defined at each tail probability level as the parameter value for…
We assume that an individual invests in a financial market with one riskless and one risky asset, with the latter's price following a diffusion with stochastic volatility. In the current financial market especially, it is important to…
In finance industry portfolio construction deals with how to divide the investors' wealth across an asset-classes' menu in order to maximize the investors' gain. Main approaches in use at the present are based on variations of the classical…
Universal features in stock markets and their derivative markets are studied by means of probability distributions in internal rates of return on buy and sell transaction pairs. Unlike the stylized facts in log normalized returns, the…
We build a simple model of leveraged asset purchases with margin calls. Investment funds use what is perhaps the most basic financial strategy, called "value investing", i.e. systematically attempting to buy underpriced assets. When funds…
The total duration of drawdowns is shown to provide a moment-free, unbiased, efficient and robust estimator of Sharpe ratios both for Gaussian and heavy-tailed price returns. We then use this quantity to infer an analytic expression of the…
Empirical studies indicate the existence of long range dependence in the volatility of the underlying asset. This feature can be captured by modeling its return and volatility using functions of a stationary fractional Ornstein--Uhlenbeck…
The coordinated and efficient distribution of limited resources by individual decisions is a fundamental, unsolved problem. When individuals compete for road capacities, time, space, money, goods, etc., they normally make decisions based on…
The purpose of this paper is to show that the use of heavy-tailed distributions in Financial problems is theoretically baseless and can lead to significant misunderstandings. The reason for this the authors see in an incorrect…
Fat tails in financial time series and increase of stocks cross-correlations in high volatility periods are puzzling facts that ask for new paradigms. Both points are of key importance in fundamental research as well as in Risk Management…
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…