Related papers: Optimal long term investment model with memory
The aim of this paper is to present a simple stochastic model that accounts for the effects of a long-memory in volatility on option pricing. The starting point is the stochastic Black-Scholes equation involving volatility with long-range…
In an incomplete market underpinned by the trinomial model, we consider two investors : an ordinary agent whose decisions are driven by public information and an insider who possesses from the beginning a surplus of information encoded…
It is believed by the majority today that the efficient market hypothesis is imperfect because of market irrationality. Using the physical concepts and mathematical structures of quantum mechanics, we construct an econophysics framework for…
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 investigate the optimal investment-reinsurance problem for insurance company with partial information on the market price of the risk. Through the use of filtering techniques we convert the original optimization problem involving…
In this paper we consider a modification of the classical Merton portfolio optimization problem. Namely, an investor can trade in financial asset and consume his capital. He is additionally endowed with a one unit of an indivisible asset…
We derive closed-form solutions to the optimal stopping problems related to the pricing of perpetual American standard and lookback put and call options in the extensions of the Black-Merton-Scholes model with progressively enlarged…
Portfolio optimization approaches inevitably rely on multivariate modeling of markets and the economy. In this paper, we address three sources of error related to the modeling of these complex systems: 1. oversimplifying hypothesis; 2.…
Insider information and model uncertainty are two unavoidable problems for the portfolio selection theory in reality. This paper studies the robust optimal portfolio strategy for an investor who owns general insider information under model…
We consider an augmented version of Merton's portfolio choice problem, where trading by large investors influences the price of underlying financial asset leading to strategic interaction among investors, with investors deciding their…
Financial stock returns correlations have been studied in the prism of random matrix theory, to distinguish the signal from the "noise". Eigenvalues of the matrix that are above the rescaled Marchenko Pastur distribution can be interpreted…
In this paper, we assume an insure is allowed to purchase proportional reinsurance and can invest his or her wealth into the financial market where a savings account, stocks and bonds are available. Different from classical optimal…
We consider a problem of optimal investment with intermediate consumption and random endowment in an incomplete semimartingale model of a financial market. We establish the key assertions of the utility maximization theory assuming that…
In this paper, we consider the problem of optimal investment by an insurer. The insurer invests in a market consisting of a bank account and $m$ risky assets. The mean returns and volatilities of the risky assets depend nonlinearly on…
In this paper, we consider the robust optimal reinsurance investment problem of the insurer under the $\alpha$-maxmin mean-variance criterion in the defaultable market. The financial market consists of risk-free bonds, a stock and a…
Stochastic systems with memory naturally appear in life science, economy, and finance. We take the modelling point of view of stochastic functional delay equations and we study these structures when the driving noises admit jumps. Our…
In this paper, the Kyle model of insider trading is extended by characterizing the trading volume with long memory and allowing the noise trading volatility to follow a general stochastic process. Under this newly revised model, the…
We consider the problem of designing almost optimal predictors for dynamical systems from a finite sequence of noisy observations and incomplete knowledge of the dynamics and the noise. We first discuss the properties of the optimal (Bayes)…
Propose a deep learning driven multi factor investment model optimization method for risk control. By constructing a deep learning model based on Long Short Term Memory (LSTM) and combining it with a multi factor investment model, we…
Portfolio managers often evaluate performance relative to benchmark, usually taken to be the Standard & Poor 500 stock index fund. This relative portfolio wealth is defined as the absolute portfolio wealth divided by wealth from investing…