Related papers: Dynamic asset trees and portfolio analysis
The minimum linear arrangement problem on a network consists of finding the minimum sum of edge lengths that can be achieved when the vertices are arranged linearly. Although there are algorithms to solve this problem on trees in polynomial…
In a highly interdependent economic world, the nature of relationships between financial entities is becoming an increasingly important area of study. Recently, many studies have shown the usefulness of minimal spanning trees (MST) in…
In this paper, we propose a market model with returns assumed to follow a multivariate normal tempered stable distribution defined by a mixture of the multivariate normal distribution and the tempered stable subordinator. This distribution…
Portfolio optimization has long been dominated by covariance-based strategies, such as the Markowitz Mean-Variance framework. However, these approaches often fail to ensure a balanced risk structure across assets, leading to concentration…
A spanning tree of an unweighted graph is a minimum average stretch spanning tree if it minimizes the ratio of sum of the distances in the tree between the end vertices of the graph edges and the number of graph edges. We consider the…
In this paper, we revisit the relationship between investors' utility functions and portfolio allocation rules. We derive portfolio allocation rules for asymmetric Laplace distributed $ALD(\mu,\sigma,\kappa)$ returns and compare them with…
This paper studies a portfolio optimization problem in a discrete-time Markovian model of a financial market, in which asset price dynamics depend on an external process of economic factors. There are transaction costs with a structure that…
In his famous paper, Markowitz (1952) derived the dependence of portfolio random returns on the random returns of its securities. This result allowed Markowitz to obtain his famous expression for portfolio variance. We show that Markowitz's…
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…
We study infinite tree and ultrametric matrices, and their action on the boundary of the tree. For each tree matrix we show the existence of a symmetric random walk associated to it and we study its Green potential. We provide a…
We study correlations of a set of stocks selected from both the New York and London stock exchanges. Results are displayed using both Random Matrix Theory approach and the graphical visualisation of the Minimal Spanning Tree. For the set of…
Financial networks have become extremely useful in characterizing the structure of complex financial systems. Meanwhile, the time evolution property of the stock markets can be described by temporal networks. We utilize the temporal network…
It has been proved that the spanning tree from a given network has the optimal synchronizability, which means the index $R=\lambda_{N}/\lambda_{2}$ reaches the minimum 1. Although the optimal synchronizability is corresponding to the…
We propose a data-driven Neural Network (NN) optimization framework to determine the optimal multi-period dynamic asset allocation strategy for outperforming a general stochastic target. We formulate the problem as an optimal stochastic…
We study a new type of random minimum spanning trees. It is built on the complete graph where each vertex is given a weight, which is a positive real number. Then, each edge is given a capacity which is a random variable that only depends…
We consider the problem of portfolio selection within the classical Markowitz mean-variance framework, reformulated as a constrained least-squares regression problem. We propose to add to the objective function a penalty proportional to the…
We propose and study a simple model of dynamical redistribution of capital in a diversified portfolio. We consider a hypothetical situation of a portfolio composed of N uncorrelated stocks. Each stock price follows a multiplicative random…
Portfolio management problems are often divided into two types: active and passive, where the objective is to outperform and track a preselected benchmark, respectively. Here, we formulate and solve a dynamic asset allocation problem that…
We investigate a factor that can affect the number of links of a specific stock in a network between stocks created by the minimal spanning tree (MST) method, by using individual stock data listed on the S&P500 and KOSPI. Among the common…
Selecting the optimal Markowitz porfolio depends on estimating the covariance matrix of the returns of $N$ assets from $T$ periods of historical data. Problematically, $N$ is typically of the same order as $T$, which makes the sample…