Related papers: Dynamical Optimization Theory of a Diversified Por…
This paper investigates dynamic and static fund separations and their stability for long-term optimal investments under three model classes. An investor maximizes the expected utility with constant relative risk aversion under an incomplete…
We consider an investor faced with the utility maximization problem in which the risky asset price process has pure-jump dynamics affected by an unobservable continuous-time finite-state Markov chain, the intensity of which can also be…
This paper proposes a Deep Reinforcement Learning algorithm for financial portfolio trading based on Deep Q-learning. The algorithm is capable of trading high-dimensional portfolios from cross-sectional datasets of any size which may…
A market model in Stochastic Portfolio Theory is a finite system of strictly positive stochastic processes. Each process represents the capitalization of a certain stock. If at any time no stock dominates almost the entire market, which…
We consider the optimal allocation of generic resources among multiple generic entities of interest over a finite planning horizon, where each entity generates stochastic returns as a function of its resource allocation during each period.…
We consider the problem of dynamic buying and selling of shares from a collection of $N$ stocks with random price fluctuations. To limit investment risk, we place an upper bound on the total number of shares kept at any time. Assuming that…
This paper develops a method to derive optimal portfolios and risk premia explicitly in a general diffusion model for an investor with power utility and a long horizon. The market has several risky assets and is potentially incomplete.…
A new framework for portfolio diversification is introduced which goes beyond the classical mean-variance approach and portfolio allocation strategies such as risk parity. It is based on a novel concept called portfolio dimensionality that…
Stock portfolio optimization is the process of constant re-distribution of money to a pool of various stocks. In this paper, we will formulate the problem such that we can apply Reinforcement Learning for the task properly. To maintain a…
A dynamical model of capital exchange is introduced in which a specified amount of capital is exchanged between two individuals when they meet. The resulting time dependent wealth distributions are determined for a variety of exchange…
The Capital Asset Pricing Model (CAPM) relates a well-diversified stock portfolio to a benchmark portfolio. We insert size effect in CAPM, capturing the observation that small stocks have higher risk and return than large stocks, on…
Risk control and optimal diversification constitute a major focus in the finance and insurance industries as well as, more or less consciously, in our everyday life. We present a discussion of the characterization of risks and of the…
This paper investigates the investment problem of constructing an optimal no-short sequential portfolio strategy in a market with a latent dependence structure between asset prices and partly unobservable side information, which is often…
Capital distribution curve is defined as log-log plot of normalized stock capitalizations ranked in descending order. The curve displays remarkable stability over periods of time. Theory of exchangeable distributions on set partitions,…
Recent developments in deep learning techniques have motivated intensive research in machine learning-aided stock trading strategies. However, since the financial market has a highly non-stationary nature hindering the application of…
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…
Portfolio optimization methods suffer from a catalogue of known problems, mainly due to the facts that pair correlations of asset returns are unstable, and that extremal risk measures such as maximum drawdown are difficult to predict due to…
In this paper, we implement and evaluate a conditional diffusion model for asset return prediction and portfolio construction on large-scale equity data. Our method models the full distribution of future returns conditioned on firm…
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…
We examine the problem of optimal portfolio allocation within the framework of utility theory. We apply exponential utility to derive the optimal diversification strategy and logarithmic utility to determine the optimal leverage. We enhance…