Related papers: Large deviations and portfolio optimization
Portfolio optimization involves determining the optimal allocation of portfolio assets in order to maximize a given investment objective. Traditionally, some form of mean-variance optimization is used with the aim of maximizing returns…
Markowitz (1952, 1959) laid down the ground-breaking work on the mean-variance analysis. Under his framework, the theoretical optimal allocation vector can be very different from the estimated one for large portfolios due to the intrinsic…
While the Kelly portfolio has many desirable properties, including optimal long-term growth rate, the resulting investment strategy is rather aggressive. In this paper, we suggest a unified approach to the risk assessment of the Kelly…
For long term investments, model portfolios are defined at the level of indexes, a setup known as Strategic Asset Allocation (SAA). The possible outcomes at a scale of a few decades can be obtained by Monte Carlo simulations, resulting in a…
Due to their heterogeneity, insurance risks can be properly described as a mixture of different fixed models, where the weights assigned to each model may be estimated empirically from a sample of available data. If a risk measure is…
In this paper, we consider the problem of optimization of a portfolio consisting of securities. An investor with an initial capital, is interested in constructing a portfolio of securities. If the prices of securities change, the investor…
In this paper, we revisit the portfolio optimization problems of the minimization/maximization of investment risk under constraints of budget and investment concentration (primal problem) and the maximization/minimization of investment…
In this work we investigate the optimal proportional reinsurance-investment strategy of an insurance company which wishes to maximize the expected exponential utility of its terminal wealth in a finite time horizon. Our goal is to extend…
Risk control has become one of the major concern of financial institutions. The need for adequate statistical tools to measure and anticipate the amplitude of the potential moves of financial markets is clearly expressed, in particular for…
This work initiates research into the problem of determining an optimal investment strategy for investors with different attitudes towards the trade-offs of risk and profit. The probability distribution of the return values of the stocks…
The paper studies problem of continuous time optimal portfolio selection for a incom- plete market diffusion model. It is shown that, under some mild conditions, near optimal strategies for investors with different performance criteria can…
In this work, we introduce Modern Portfolio Theory using basic concepts from linear algebra, differential calculus, statistics, and optimization. This theory allows us to measure the return and risk of an investment portfolio, serving as a…
Optimization of distortion riskmetrics with distributional uncertainty has wide applications in finance and operations research. Distortion riskmetrics include many commonly applied risk measures and deviation measures, which are not…
The optimal allocation of assets has been widely discussed with the theoretical analysis of risk measures, and pessimism is one of the most attractive approaches beyond the conventional optimal portfolio model. The $\alpha$-risk plays a…
Firms should keep capital to offer sufficient protection against the risks they are facing. In the insurance context methods have been developed to determine the minimum capital level required, but less so in the context of firms with…
A discrete time probabilistic model, for optimal equity allocation and portfolio selection, is formulated so as to apply to (at least) reinsurance. In the context of a company with several portfolios (or subsidiaries), representing both…
We propose a definition of diversification as a binary relationship between financial portfolios. According to it, a convex linear combination of several risk positions with some weights is considered to be less risky than the probabilistic…
It is well known that mean-variance portfolio selection is a time-inconsistent optimal control problem in the sense that it does not satisfy Bellman's optimality principle and therefore the usual dynamic programming approach fails. We…
We study the continuous time portfolio optimization model on the market where the mean returns of individual securities or asset categories are linearly dependent on underlying economic factors. We introduce the functional $Q_\gamma$…
In this paper, we propose a general bi-objective model for portfolio selection, aiming to maximize both a diversification measure and the portfolio expected return. Within this general framework, we focus on maximizing a diversification…