Related papers: The Feedback Effect of Hedging in Portfolio Optimi…
In this paper we solve the hedge fund manager's optimization problem in a model that allows for investors to enter and leave the fund over time depending on its performance. The manager's payoff at the end of the year will then depend not…
This study investigates three central questions in portfolio optimization. First, whether time-varying moment estimators outperform conventional sample estimators in practical portfolio construction. Second, whether incorporating a turnover…
We study the optimal portfolio liquidation problem over a finite horizon in a limit order book with bid-ask spread and temporary market price impact penalizing speedy execution trades. We use a continuous-time modeling framework, but in…
This paper goes beyond the optimal trading Mean Field Game model introduced by Pierre Cardaliaguet and Charles-Albert Lehalle in [Cardaliaguet, P. and Lehalle, C.-A., Mean field game of controls and an application to trade crowding,…
We consider a dynamic portfolio optimization problem that incorporates predictable returns, instantaneous transaction costs, price impact, and stochastic volatility, extending the classical results of Garleanu and Pedersen (2013), which…
In financial asset management, choosing a portfolio requires balancing returns, risk, exposure, liquidity, volatility and other factors. These concerns are difficult to compare explicitly, with many asset managers using an intuitive or…
We propose a frustrated and disordered many-body model of a stockmarket in which independent adaptive traders can trade a stock subject to the economic law of supply and demand. We show that the typical scaling properties and the correlated…
Managing a portfolio to a risk model can tilt the portfolio toward weaknesses of the model. As a result, the optimized portfolio acquires downside exposure to uncertainty in the model itself, what we call "second order risk." We propose a…
Value adjustment of uncollateralized trades is determined within a risk-neutral pricing framework. When hedging such trades, investors cannot freely trade protection on their own name, thus facing an incomplete market. This fact is…
A fund manager invests both the fund's assets and own private wealth in separate but potentially correlated risky assets, aiming to maximize expected utility from private wealth in the long run. If relative risk aversion and investment…
In this article, we introduce an algorithm called Backward Hedging, designed for hedging European and American options while considering transaction costs. The optimal strategy is determined by minimizing an appropriate loss function, which…
High-speed computerized trading, often called "high-frequency trading" (HFT), has increased dramatically in financial markets over the last decade. In the US and Europe, it now accounts for nearly one-half of all trades. Although evidence…
We consider the problem of minimizing capital at risk in the Black-Scholes setting. The portfolio problem is studied given the possibility that a correlation constraint between the portfolio and a financial index is imposed. The optimal…
The classical discrete time model of proportional transaction costs relies on the assumption that a feasible portfolio process has solvent increments at each step. We extend this setting in two directions, allowing for convex transaction…
This paper investigates performance attribution measures as a basis for constraining portfolio optimization. We employ optimizations that minimize expected tail loss and investigate both asset allocation (AA) and the selection effect (SE)…
The paper presents two new approaches to modeling the interaction of small and medium pricetaking traders with a stock exchange. In the framework of these approaches, the traders can form and manage their portfolios of financial instruments…
Arbitrage is one important revenue source for energy storage in electricity markets. However, a large amount of storage in the market will impact the energy price and reduce potential revenues. This can lead to strategic behaviors of…
In this study, we have investigated empirically the effects of market properties on the degree of diversification of investment weights among stocks in a portfolio. The weights of stocks within a portfolio were determined on the basis of…
We present a robust Deep Hedging framework for the pricing and hedging of option portfolios that significantly improves training efficiency and model robustness. In particular, we propose a neural model for training model embeddings which…
In the context of investment analysis, we formulate an abstract online computing problem called a planning game and develop general tools for solving such a game. We then use the tools to investigate a practical buy-and-hold trading problem…