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Asset allocation using reinforcement learning has advantages such as flexibility in goal setting and utilization of various information. However, existing asset allocation methods do not consider the following viewpoints in solving the…
Market traders often engage in the frequent transaction of volatile assets to optimize their total return. In this study, we introduce a novel investment strategy model, anchored on the 'lazy factor.' Our approach bifurcates into a Price…
How can graph theory be applied to investing in the stock market? The answer may help investors realize the true risks of their investments, help prevent recessions like that of 2008, and increase financial literacy amongst students. Using…
The potential of machine learning to automate and control nonlinear, complex systems is well established. These same techniques have always presented potential for use in the investment arena, specifically for the managing of equity…
In portfolio risk minimization, the inverse covariance matrix of returns is often unknown and has to be estimated in practice. This inverse covariance matrix also prescribes the hedge trades in which a stock is hedged by all the other…
Cumulative prospect theory (CPT) is the first theory for decision-making under uncertainty that combines full theoretical soundness and empirically realistic features [P.P. Wakker - Prospect theory: For risk and ambiguity, Page 2]. While…
A diversified risk-adjusted time-series momentum (TSMOM) portfolio can deliver substantial abnormal returns and offer some degree of tail risk protection during extreme market events. The performance of existing TSMOM strategies, however,…
Investors try to predict returns of financial assets to make successful investment. Many quantitative analysts have used machine learning-based methods to find unknown profitable market rules from large amounts of market data. However,…
We investigate portfolio optimization in financial markets from a trading and risk management perspective. We term this task Risk-Aware Trading Portfolio Optimization (RATPO), formulate the corresponding optimization problem, and propose an…
Successful quantitative investment usually relies on precise predictions of the future movement of the stock price. Recently, machine learning based solutions have shown their capacity to give more accurate stock prediction and become…
Algorithmic trading refers to executing buy and sell orders for specific assets based on automatically identified trading opportunities. Strategies based on reinforcement learning (RL) have demonstrated remarkable capabilities in addressing…
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 managing the Value at Risk (VaR) assuming a heavy tailed distribution of…
Portfolio management remains a crucial challenge in finance, with traditional methods often falling short in complex and volatile market environments. While deep reinforcement approaches have shown promise, they still face limitations in…
We study Merton's expected utility maximization problem in an incomplete market, characterized by a factor process in addition to the stock price process, where all the model primitives are unknown. The agent under consideration is a price…
Cumulative prospect theory (CPT) is known to model human decisions well, with substantial empirical evidence supporting this claim. CPT works by distorting probabilities and is more general than the classic expected utility and coherent…
Deep Reinforcement Learning (DRL) algorithms can scale to previously intractable problems. The automation of profit generation in the stock market is possible using DRL, by combining the financial assets price "prediction" step and the…
Financial portfolio management is one of the problems that are most frequently encountered in the investment industry. Nevertheless, it is not widely recognized that both Kelly Criterion and Risk Parity collapse into Mean Variance under…
Patch foraging involves the deliberate and planned process of determining the optimal time to depart from a resource-rich region and investigate potentially more beneficial alternatives. The Marginal Value Theorem (MVT) is frequently used…
We confirm universal behaviors such as eigenvalue distribution and spacings predicted by Random Matrix Theory (RMT) for the cross correlation matrix of the daily stock prices of Tokyo Stock Exchange from 1993 to 2001, which have been…
Finding an optimal balance between risk and returns in investment portfolios is a central challenge in quantitative finance, often addressed through Markowitz portfolio theory (MPT). While traditional portfolio optimization is carried out…