Related papers: Optimal lag in dynamical investments
In life-cycle economics the Samuelson paradigm (Samuelson, 1969) states that the optimal investment is in constant proportions out of lifetime wealth composed of current savings and the present value of future income. It is well known that…
This paper studies a continuous-time market {under stochastic environment} where an agent, having specified an investment horizon and a target terminal mean return, seeks to minimize the variance of the return with multiple stocks and a…
Excessive leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be…
This paper studies the problem of optimal investment in incomplete markets, robust with respect to stopping times. We work on a Brownian motion framework and the stopping times are adapted to the Brownian filtration. Robustness can only be…
Models of adaptive bet-hedging commonly adopt insights from Kelly's famous work on optimal gambling strategies and the financial value of information. In particular, such models seek evolutionary solutions that maximize long term average…
In this paper we develop a statistical arbitrage trading strategy with two key elements in hi-frequency trading: stop-loss and leverage. We consider, as in Bertram (2009), a mean-reverting process for the security price with proportional…
The problem of portfolio optimization is one of the most important issues in asset management. This paper proposes a new dynamic portfolio strategy based on the time-varying structures of MST networks in Chinese stock markets, where the…
We consider a continuous-time game-theoretic model of an investment market with short-lived assets and endogenous asset prices. The first goal of the paper is to formulate a stochastic equation which determines wealth processes of investors…
The lead-lag effect, where the price movement of one asset systematically precedes that of another, has been widely observed in financial markets and conveys valuable predictive signals for trading. However, traditional lead-lag detection…
We consider the problem of optimal investment with random endowment in a Black--Scholes market for an agent with constant relative risk aversion. Using duality arguments, we derive an explicit expression for the optimal trading strategy,…
Consider a dynamic decision-making scenario where at every stage the investor has to choose between investing in one of two projects or gathering more information. At each stage, the investor may seek counsel from one of several…
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 considers the problem of optimal liquidation of a position in a risky security in a financial market, where price evolution are risky and trades have an impact on price as well as uncertainty in the filling orders. The problem is…
When the planning horizon is long, and the safe asset grows indefinitely, isoelastic portfolios are nearly optimal for investors who are close to isoelastic for high wealth, and not too risk averse for low wealth. We prove this result in a…
A fractal approach to the long-short portfolio optimization is proposed. The algorithmic system based on the composition of market-neutral spreads into a single entity was considered. The core of the optimization scheme is a fractal walk…
This paper addresses a novel \emph{cost-sensitive} distributionally robust log-optimal portfolio problem, where the investor faces \emph{ambiguous} return distributions, and a general convex transaction cost model is incorporated. The…
The aim of this work consists in the study of the optimal investment strategy for a behavioural investor, whose preference towards risk is described by both a probability distortion and an S-shaped utility function. Within a continuous-time…
We consider the hedging error of a derivative due to discrete trading in the presence of a drift in the dynamics of the underlying asset. We suppose that the trader wishes to find rebalancing times for the hedging portfolio which enable him…
We address the problem of portfolio optimization under the simplest coherent risk measure, i.e. the expected shortfall. As it is well known, one can map this problem into a linear programming setting. For some values of the external…
Ergodicity describes an equivalence between the expectation value and the time average of observables. Applied to human behaviour, ergodic theories of decision-making reveal how individuals should tolerate risk in different environments. To…