Related papers: Risk portofolio management under Zipf analysis bas…
Managing investment portfolios is an old and well know problem in multiple fields including financial mathematics and financial engineering as well as econometrics and econophysics. Multiple different concepts and theories were used so far…
Portfolio management is an essential component of investment strategy that aims to maximize returns while minimizing risk. This paper explores several portfolio management strategies, including asset allocation, diversification, active…
The construction of an efficient portfolio with a good level of return and minimal risk depends on selecting the optimal combination of stocks. This paper introduces a novel decision-making framework for stock selection based on fractional…
We propose a novel approach to infer investors' risk preferences from their portfolio choices, and then use the implied risk preferences to measure the efficiency of investment portfolios. We analyze a dataset spanning a period of six…
The Sharpe ratio is a way to compare the excess returns (over the risk free asset) of portfolios for each unit of volatility that is generated by a portfolio. In this paper we introduce a robust Sharpe ratio portfolio under the assumption…
We provide analytical results for a static portfolio optimization problem with two coherent risk measures. The use of two risk measures is motivated by joint decision-making for portfolio selection where the risk perception of the portfolio…
The fundamental principle in Modern Portfolio Theory (MPT) is based on the quantification of the portfolio's risk related to performance. Although MPT has made huge impacts on the investment world and prompted the success and prevalence of…
We propose a route for the evaluation of risk based on a transformation of the covariance matrix. The approach uses a `potential' or `objective' function. This allows us to rescale data from different assets (or sources) such that each data…
Portfolio optimization has long been dominated by covariance-based strategies, such as the Markowitz Mean-Variance framework. However, these approaches often fail to ensure a balanced risk structure across assets, leading to concentration…
Portfolio optimization methods have evolved significantly since Markowitz introduced the mean-variance framework in 1952. While the theoretical appeal of this approach is undeniable, its practical implementation poses important challenges,…
This work initiates research into the problem of determining an optimal investment strategy for investors with different attitudes towards the trade-offs of risk and profit. The probability distribution of the return values of the stocks…
The Pareto model is very popular in risk management, since simple analytical formulas can be derived for financial downside risk measures (Value-at-Risk, Expected Shortfall) or reinsurance premiums and related quantities (Large Claim Index,…
Analytical, free of time consuming Monte Carlo simulations, framework for credit portfolio systematic risk metrics calculations is presented. Techniques are described that allow calculation of portfolio-level systematic risk measures…
Managing a portfolio to a risk model can tilt the portfolio toward weaknesses of the model. As a result, the optimized portfolio acquires downside exposure to uncertainty in the model itself, what we call "second order risk." We propose a…
Risk allocation, the decomposition of a portfolio-wide risk measure into component contributions, is a fundamental problem in financial risk management due to the non-additive nature of risk measures, the layered organizational structures…
High precision analytical approximation is proposed for variance-covariance based risk allocation in a portfolio of risky assets. A general case of a single-period multi-factor Merton-type model with stochastic recovery is considered. The…
With the good development in the financial industry, the market starts to catch people's eyes, not only by the diversified investing choices ranging from bonds and stocks to futures and options but also by the general "high-risk,…
We consider an investor, whose portfolio consists of a single risky asset and a risk free asset, who wants to maximize his expected utility of the portfolio subject to the Value at Risk assuming a heavy tail distribution of the stock prices…
We discuss - in what is intended to be a pedagogical fashion - generalized "mean-to-risk" ratios for portfolio optimization. The Sharpe ratio is only one example of such generalized "mean-to-risk" ratios. Another example is what we term the…
The potential benefits of portfolio diversification have been known to investors for a long time. Markowitz (1952) suggested the seminal approach for optimizing the portfolio problem based on finding the weights as budget shares that…