Related papers: Risk and Utility in Portfolio Optimization
In this paper, the mean-variance portfolio selection problem with Poisson jumps are studied, where the recursive utility is given by the solution to a backward stochastic differential equation with Poisson jumps. Both the maximum principle…
This paper investigates the problem of maximizing expected terminal utility in a discrete-time financial market model with a finite horizon under non-dominated model uncertainty. We use a dynamic programming framework together with…
We study a continuous-time expected utility maximization problem in which the investor at maturity receives the value of a contingent claim in addition to the investment payoff from the financial market. The investor knows nothing about the…
A drawdown constraint forces the current wealth to remain above a given function of its maximum to date. We consider the portfolio optimisation problem of maximising the long-term growth rate of the expected utility of wealth subject to a…
This paper investigates well posedness of utility maximization problems for financial markets where stock returns depend on a hidden Gaussian mean reverting drift process. Since that process is potentially unbounded, well posedness cannot…
This paper considers the mean variance portfolio management problem. We examine portfolios which contain both primary and derivative securities. The challenge in this context is due to portfolio's nonlinearities. The delta-gamma…
The "standard" Merton formulation of optimal investment and consumption involves optimizing the integrated lifetime utility of consumption, suitably discounted, together with the discounted future bequest. In this formulation the utility of…
Portfolio optimization is a task that investors use to determine the best allocations for their investments, and fund managers implement computational models to help guide their decisions. While one of the most common portfolio optimization…
In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the…
We consider the investor who doesn't trade shares of his portfolio. The investor only observes the current trades made in the market with his securities to estimate the current return, variance, and risks of his unchanged portfolio. We show…
We introduce a universal framework for mean-covariance robust risk measurement and portfolio optimization. We model uncertainty in terms of the Gelbrich distance on the mean-covariance space, along with prior structural information about…
In this paper we consider the strategic asset allocation of an insurance company. This task can be seen as a special case of portfolio optimization. In the 1950s, Markowitz proposed to formulate portfolio optimization as a bicriteria…
Managing investment portfolios is an old and well know problem in multiple fields including financial mathematics and financial engineering as well as econometrics and econophysics. Multiple different concepts and theories were used so far…
Empirical studies indicate the presence of multi-scales in the volatility of underlying assets: a fast-scale on the order of days and a slow-scale on the order of months. In our previous works, we have studied the portfolio optimization…
This paper proposes a new method for financial portfolio optimization based on reducing simultaneous asset shocks across a collection of assets. This may be understood as an alternative approach to risk reduction in a portfolio based on a…
In this paper, we investigate the features and the performance of the Risk Parity (RP) portfolios using the Mean Absolute Deviation (MAD) as a risk measure. The RP model is a recent strategy for asset allocation that aims at equally sharing…
We study the Merton portfolio management problem within a complete market, non constant time discount rate and general utility framework. The non constant discount rate introduces time inconsistency which can be solved by introducing sub…
We consider the economic problem of optimal consumption and investment with power utility. We study the optimal strategy as the relative risk aversion tends to infinity or to one. The convergence of the optimal consumption is obtained for…
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…
The maximum entropy principle can be used to assign utility values when only partial information is available about the decision maker's preferences. In order to obtain such utility values it is necessary to establish an analogy between…