Related papers: Dynamic asset trees and portfolio analysis
Spanning trees of low average stretch on the non-tree edges, as introduced by Alon et al. [SICOMP 1995], are a natural graph-theoretic object. In recent years, they have found significant applications in solvers for symmetric diagonally…
We introduce a fairly general, recombining trinomial tree model in the natural world. Market-completeness is ensured by considering a market consisting of two risky assets, a riskless asset, and a European option. The two risky assets…
In this paper, we study the form over the minimum spanning tree problem (MST) from which we will derive an intuitively generalized model and new methods with the upper bound of runtimes of logarithm. The new pattern we made has taken…
Trees and the associated shortest-path tree metrics provide a powerful framework for representing hierarchical and combinatorial structures in data. Given an arbitrary metric space, its deviation from a tree metric can be quantified by…
The mean-variance portfolio model, based on the risk-return trade-off for optimal asset allocation, remains foundational in portfolio optimization. However, its reliance on restrictive assumptions about asset return distributions limits its…
This paper studies the problem of maximizing expected utility from terminal wealth combining a static position in derivative securities, which we assume can be traded only at time zero, with a traditional dynamic trading strategy in stocks.…
We follow the main stocks belonging to the New York Stock Exchange and to Nasdaq from 2003 to 2012, through years of normality and of crisis, and study the dynamics of networks built on two measures expressing relations between those…
The dynamical phenomena of complex networks are very difficult to predict from local information due to the rich microstructures and corresponding complex dynamics. On the other hands, it is a horrible job to compute some stochastic…
For a random walk on a network, the mean first-passage time from a node $i$ to another node $j$ chosen stochastically according to the equilibrium distribution of Markov chain representing the random walk is called Kemeny constant, which is…
This paper explores the practical approach to portfolio selection methods for investments. The study delves into portfolio theory, discussing concepts such as expected return, variance, asset correlation, and opportunity sets. It also…
Portfolio optimization emerged with the seminal paper of Markowitz (1952). The original mean-variance framework is appealing because it is very efficient from a computational point of view. However, it also has one well-established failing…
In this paper we analyse the structure of Warsaw's stock market using complex systems methodology together with network science and information theory. We find minimal spanning trees for log returns on Warsaw's stock exchange for yearly…
We describe an optimization-based tax-aware portfolio construction method that adds tax liability to standard Markowitz-based portfolio construction. Our method produces a trade list that specifies the number of shares to buy of each asset…
In this paper we estimate the mean-variance portfolio in the high-dimensional case using the recent results from the theory of random matrices. We construct a linear shrinkage estimator which is distribution-free and is optimal in the sense…
Markowitz's celebrated mean--variance portfolio optimization theory assumes that the means and covariances of the underlying asset returns are known. In practice, they are unknown and have to be estimated from historical data. Plugging the…
Interpretability is crucial for doctors, hospitals, pharmaceutical companies and biotechnology corporations to analyze and make decisions for high stakes problems that involve human health. Tree-based methods have been widely adopted for…
In the existing financial literature, entropy based ideas have been proposed in portfolio optimization, in model calibration for options pricing as well as in ascertaining a pricing measure in incomplete markets. The abstracted problem…
We introduce a discrete binary tree for pricing contingent claims with the underlying security prices exhibiting history dependence characteristic of that induced by market microstructure phenomena. Example dependencies considered include…
In the context of stochastic portfolio theory we introduce a novel class of portfolios which we call linear path-functional portfolios. These are portfolios which are determined by certain transformations of linear functions of a…
We consider a portfolio allocation problem for trend following (TF) strategies on multiple correlated assets. Under simplifying assumptions of a Gaussian market and linear TF strategies, we derive analytical formulas for the mean and…