Related papers: Computing strategies for achieving acceptability
We consider the problem of the statistical uncertainty of the correlation matrix in the optimization of a financial portfolio. We show that the use of clustering algorithms can improve the reliability of the portfolio in terms of the ratio…
The classical discrete time model of proportional transaction costs relies on the assumption that a feasible portfolio process has solvent increments at each step. We extend this setting in two directions, allowing for convex transaction…
An empirical analysis, suggested by optimal Merton dynamics, reveals some unexpected features of asset volumes. These features are connected to traders' belief and risk aversion. This paper proposes a trading strategy model in the optimal…
We study the numerical computation of an expectation of a bounded function with respect to a measure given by a non-normalized density on a convex body. We assume that the density is log-concave, satisfies a variability condition and is not…
Bitcoin is firmly becoming a mainstream asset in our global society. Its highly volatile nature has traders and speculators flooding into the market to take advantage of its significant price swings in the hope of making money. This work…
In black-box optimization, a central question is which algorithm to use to solve a given, previously unseen, problem. Selecting a single algorithm, however, entails inherent risks: inaccuracies in the selector may lead to poor choices, and…
Portfolio optimisation is essential in quantitative investing, but its implementation faces several practical difficulties. One particular challenge is converting optimal portfolio weights into real-life trades in the presence of realistic…
Black-box complexity is a complexity theoretic measure for how difficult a problem is to be optimized by a general purpose optimization algorithm. It is thus one of the few means trying to understand which problems are tractable for genetic…
To execute a trade, participants in electronic equity markets may choose to submit limit orders or market orders across various exchanges where a stock is traded. This decision is influenced by the characteristics of the order flow and…
We develop a dual-control method for approximating investment strategies in incomplete environments that emerge from the presence of trading constraints. Convex duality enables the approximate technology to generate lower and upper bounds…
We consider the problem of choosing a portfolio that maximizes the cumulative prospect theory (CPT) utility on an empirical distribution of asset returns. We show that while CPT utility is not a concave function of the portfolio weights, it…
In this paper, we address one of the main puzzles in finance observed in the stock market by proponents of behavioral finance: the stock predictability puzzle. We offer a statistical model within the context of rational finance which can be…
This paper investigates a continuous-time portfolio optimization problem with the following features: (i) a no-short selling constraint; (ii) a leverage constraint, that is, an upper limit for the sum of portfolio weights; and (iii) a…
AI and data driven solutions have been applied to different fields and achieved outperforming and promising results. In this research work we apply k-Nearest Neighbours, eXtreme Gradient Boosting and Random Forest classifiers for detecting…
We present an arbitrage free theoretical framework for modeling bid and ask prices of dividend paying securities in a discrete time setup using theory of dynamic acceptability indices. In the first part of the paper we develop the theory of…
Optimization algorithms appear in the core calculations of numerous Artificial Intelligence (AI) and Machine Learning methods, as well as Engineering and Business applications. Following recent works on the theoretical deficiencies of AI, a…
A continuous-time financial portfolio selection model with expected utility maximization typically boils down to solving a (static) convex stochastic optimization problem in terms of the terminal wealth, with a budget constraint. In…
The paper is devoted to modeling optimal exercise strategies of the behavior of investors and issuers working with convertible bonds. This implies solution of the problems of stock price modeling, payoff computation and min-max…
In this paper, we present a method for constructing a (static) portfolio of co-maturing European options whose price sign is determined by the skewness level of the associated implied volatility. This property holds regardless of the…
This paper develops an axiomatic framework for ranking metrics, a general class of functionals for evaluating and ordering financial or insurance positions. Unlike traditional risk-adjusted performance measures-such as the Sharpe ratio,…