Related papers: A Portfolio Decomposition Formula
The comparative statics of the optimal portfolios across individuals is carried out for a continuous-time complete market model, where the risky assets price process follows a joint geometric Brownian motion with time-dependent and…
In this paper we address the problem of optimal liquidation of a large portfolio composed by securities exposed to default risk. The default time is described in terms of a Brownian motion representing the evolution of the value of the…
This paper aims to develop new mathematical and computational tools for modeling the distribution of portfolio returns across portfolios. We establish relevant mathematical formulas and propose efficient algorithms, drawing upon powerful…
In this paper we develop a concrete and fully implementable approach to the optimization of functionally generated portfolios in stochastic portfolio theory. The main idea is to optimize over a family of rank-based portfolios parameterized…
We consider an optimal investment and consumption problem for a Black-Scholes financial market with stochastic coefficients driven by a diffusion process. We assume that an agent makes consumption and investment decisions based on CRRA…
We study optimal investment problem for a diffusion market consisting of a finite number of risky assets (for example, bonds, stocks and options). Risky assets evolution is described by Ito's equation, and the number of risky assets can be…
A quadratic discrete time probabilistic model, for optimal portfolio selection in (re-)insurance is studied. For positive values of underwriting levels, the expected value of the accumulated result is optimized, under constraints on its…
We investigate the growth optimal strategy over a finite time horizon for a stock and bond portfolio in an analytically solvable multiplicative Markovian market model. We show that the optimal strategy consists in holding the amount of…
Mean-reverting portfolios with few assets, but high variance, are of great interest for investors in financial markets. Such portfolios are straightforwardly profitable because they include a small number of assets whose prices not only…
The optimal strategies for a long-term static investor are studied. Given a portfolio of a stock and a bond, we derive the optimal allocation of the capitols to maximize the expected long-term growth rate of a utility function of the…
This paper investigates the optimal selection of portfolios for power utility maximizing investors in a financial market where stock returns depend on a hidden Gaussian mean reverting drift process. Information on the drift is obtained from…
This paper studies dynamic asset allocation with interest rate risk and several sources of ambiguity. The market consists of a risk-free asset, a zero-coupon bond (both determined by a Vasicek model), and a stock. There is ambiguity about…
This survey reviews portfolio choice in settings where investment opportunities are stochastic due to, e.g., stochastic volatility or return predictability. It is explained how to heuristically compute candidate optimal portfolios using…
We consider the problem of optimal investment and consumption in a class of multidimensional jump-diffusion models in which asset prices are subject to mutually exciting jump processes. This captures a type of contagion where each downward…
This paper presents several models addressing optimal portfolio choice, optimal portfolio liquidation, and optimal portfolio transition issues, in which the expected returns of risky assets are unknown. Our approach is based on a coupling…
We consider hedging of a contingent claim by a 'semi-static' strategy composed of a dynamic position in one asset and static (buy-and-hold) positions in other assets. We give general representations of the optimal strategy and the hedging…
We study the portfolio problem of maximizing the outperformance probability over a random benchmark through dynamic trading with a fixed initial capital. Under a general incomplete market framework, this stochastic control problem can be…
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,…
Portfolio optimization is a task that investors use to determine the best allocations for their investments, and fund managers implement computational models to help guide their decisions. While one of the most common portfolio optimization…
We consider the problem of maximizing the asymptotic growth rate of an investor under drift uncertainty in the setting of stochastic portfolio theory (SPT). As in the work of Kardaras and Robertson we take as inputs (i) a Markovian…