Related papers: On the Feasibility of Portfolio Optimization under…
This paper describes an empirical study of shortfall optimization with Barra Extreme Risk. We compare minimum shortfall to minimum variance portfolios in the US, UK, and Japanese equity markets using Barra Style Factors (Value, Growth,…
In this paper, we consider the chance constrained based uncertain portfolio optimization problem in which the uncertain parameters are stochastic in nature. The primary goal of the work is to formulate the uncertain problem into a…
Motivated by the asset-liability management of a nuclear power plant operator, we consider the problem of finding the least expensive portfolio, which outperforms a given set of stochastic benchmarks. For a specified loss function, the…
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…
This paper studies the portfolio optimization problem when the investor's utility is general and the return and volatility of the risky asset are fast mean-reverting, which are important to capture the fast-time scale in the modeling of…
We propose a data-driven portfolio selection model that integrates side information, conditional estimation and robustness using the framework of distributionally robust optimization. Conditioning on the observed side information, the…
We consider a multi-step algorithm for the computation of the historical expected shortfall such as defined by the Basel Minimum Capital Requirements for Market Risk. At each step of the algorithm, we use Monte Carlo simulations to reduce…
This paper considers the portfolio management problem of optimal investment, consumption and life insurance. We are concerned with time inconsistency of optimal strategies. Natural assumptions, like different discount rates for consumption…
We analyze characteristics' joint predictive information through the lens of out-of-sample power utility functions. Linking weights to characteristics to form optimal portfolios suffers from estimation error which we mitigate by maximizing…
We study the expected utility portfolio optimization problem in an incomplete financial market where the risky asset dynamics depend on stochastic factors and the portfolio allocation is constrained to lie within a given convex set. We…
Classical portfolio optimization methods typically determine an optimal capital allocation through the implicit, yet critical, assumption of statistical time-invariance. Such models are inadequate for real-world markets as they employ…
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 sparse portfolio selection problem is one of the most famous and frequently-studied problems in the optimization and financial economics literatures. In a universe of risky assets, the goal is to construct a portfolio with maximal…
In the present paper, the minimal investment risk for a portfolio optimization problem with imposed budget and investment concentration constraints is considered using replica analysis. Since the minimal investment risk is influenced by the…
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…
Classical mean-variance portfolio theory tells us how to construct a portfolio of assets which has the greatest expected return for a given level of return volatility. Utility theory then allows an investor to choose the point along this…
We discuss a class of risk-sensitive portfolio optimization problems. We consider the portfolio optimization model investigated by Nagai in 2003. The model by its nature can include fixed income securities as well in the portfolio. Under…
We address the problem that classical risk measures may not detect the tail risk adequately. This can occur for instance due to averaging when calculating the Expected Shortfall. The current literature proposes the so-called adjusted…
We study the problem of portfolio insurance from the point of view of a fund manager, who guarantees to the investor that the portfolio value at maturity will be above a fixed threshold. If, at maturity, the portfolio value is below the…
We consider the problem of optimizing a portfolio of financial assets, where the number of assets can be much larger than the number of observations. The optimal portfolio weights require estimating the inverse covariance matrix of excess…