Related papers: Large deviations and portfolio optimization
A fundamental problem in risk management is the robust aggregation of different sources of risk in a situation where little or no data are available to infer information about their dependencies. A popular approach to solving this problem…
Large and moderate deviation probabilities play an important role in many applied areas, such as insurance and risk analysis. This paper studies the exact moderate and large deviation asymptotics in non-logarithmic form for linear processes…
This paper considers the constrained portfolio optimization in a generalized life-cycle model. The individual with a stochastic income manages a portfolio consisting of stocks, a bond, and life insurance to maximize his or her consumption…
We design an optimal strategy for investment in a portfolio of assets subject to a multiplicative Brownian motion. The strategy provides the maximal typical long-term growth rate of investor's capital. We determine the optimal fraction of…
Estimating and controlling large risks has become one of the main concern of financial institutions. This requires the development of adequate statistical models and theoretical tools (which go beyond the traditionnal theories based on…
All the financial practitioners are working in incomplete markets full of unhedgeable risk-factors. Making the situation worse, they are only equipped with the imperfect information on the relevant processes. In addition to the market risk,…
Financial portfolio management is one of the problems that are most frequently encountered in the investment industry. Nevertheless, it is not widely recognized that both Kelly Criterion and Risk Parity collapse into Mean Variance under…
We provided proof here that coefficient of variation (CV) is a direct measure of risk using an equation that has been derived here for the first time. We also presented a method to generate a stock CV based on return that strongly…
The stability of the financial system is associated with systemic risk factors such as the concurrent default of numerous small obligors. Hence it is of utmost importance to study the mutual dependence of losses for different creditors in…
In the standard equilibrium and/or arbitrage pricing framework, the value of any asset is uniquely specified from the belief that only the systematic risks need to be remunerated by the market. Here, we show that, even for arbitrary large…
The paper Zhao et al. (2015) shows that mean-CVaR-skewness portfolio optimization problems based on asymetric Laplace (AL) distributions can be transformed into quadratic optimization problems under which closed form solutions can be found.…
In this paper, both dynamic mean-variance portfolio selection problems and dynamic variance hedging problems are discussed under non-Markovian framework. Explicit closed-loop equilibrium strategies of these problems are respectively…
The classical Markowitz mean-variance model uses variance as a risk measure and calculates frontier portfolios in closed form by using standard optimization techniques. For general mean-risk models such closed form optimal portfolios are…
We solve an expected utility-maximization problem with a Value-at-risk constraint on the terminal portfolio value in an incomplete financial market due to stochastic volatility. To derive the optimal investment strategy, we use the dynamic…
We consider the valuation problem of an (insurance) company under partial information. Therefore we use the concept of maximizing discounted future dividend payments. The firm value process is described by a diffusion model with constant…
In recent years, the evaluation of the minimal investment risk of the quenched disordered system of a portfolio optimization problem and the investment concentration of the optimal portfolio has been actively investigated using the analysis…
This paper considers the portfolio management problem of optimal investment, consumption and life insurance. We are concerned with time inconsistency of optimal strategies. Natural assumptions, like different discount rates for consumption…
This paper explores option portfolio optimization when the underlying returns are skew-elliptical t-distributed. We use the variance and value at risk (VaR) to measure portfolio risk. The novelty of our work is the departure from the…
We analyse large deviations of the dynamical activity in one-dimensional systems of diffusing hard particles. Using an optimal-control representation of the large-deviation problem, we analyse effective interaction forces which can be added…
The idiosyncratic (microscopic) and systemic (macroscopic) components of market structure have been shown to be responsible for the departure of the optimal mean-variance allocation from the heuristic `equally-weighted' portfolio. In this…