投资组合管理
We proposed a new Portfolio Management method termed as Robust Log-Optimal Strategy (RLOS), which ameliorates the General Log-Optimal Strategy (GLOS) by approximating the traditional objective function with quadratic Taylor expansion. It…
We provide investment advice for an individual who wishes to minimize her lifetime poverty, with a penalty for bankruptcy or ruin. We measure poverty via a non-negative, non-increasing function of (running) wealth. Thus, the lower wealth…
We study the problem of utility maximization from terminal wealth in which an agent optimally builds her portfolio by investing in a bond and a risky asset. The asset price dynamics follow a diffusion process with regime-switching…
Alpha-based performance evaluation may fail to capture correlated residuals due to model errors. This paper proposes using the Generalized Information Ratio (GIR) to measure performance under misspecified benchmarks. Motivated by the…
The objective of this paper is to measure the degree of home bias (HB) within holdings portfolio and to identify their determining factors. By following literature and an international capital asset pricing model, we have chosen quite a…
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…
We study how trading costs are reflected in equilibrium returns. To this end, we develop a tractable continuous-time risk-sharing model, where heterogeneous mean-variance investors trade subject to a quadratic transaction cost. The…
We provide complete source code for a front-end GUI and its back-end counterpart for a stock market visualization tool. It is built based on the "functional visualization" concept we discuss, whereby functionality is not sacrificed for…
We treat utility maximization from terminal wealth for an agent with utility function $U:\mathbb{R}\to\mathbb{R}$ who dynamically invests in a continuous-time financial market and receives a possibly unbounded random endowment. We prove the…
We study an optimization-based approach to con- struct a mean-reverting portfolio of assets. Our objectives are threefold: (1) design a portfolio that is well-represented by an Ornstein-Uhlenbeck process with parameters estimated by maximum…
We study exponential Levy models with change-point which is a random variable, independent from initial Levy processes. On canonical space with initially enlarged filtration we describe all equivalent martingale measures for change-point…
In this paper, the optimal mean-reverting portfolio (MRP) design problem is considered, which plays an important role for the statistical arbitrage (a.k.a. pairs trading) strategy in financial markets. The target of the optimal MRP design…
In light of the power problems of statistical tests and undisciplined use of alpha-based statistics to compare models, this paper proposes a unified set of distance-based performance metrics, derived as the square root of the sum of squared…
This paper studies a non-stochastic version of Fernholz's stochastic portfolio theory for a simple model of stock markets with continuous price paths. It establishes non-stochastic versions of the most basic results of stochastic portfolio…
In this paper, we construct a solution to the optimal contract problem for delegated portfolio management of the fist-best (risk-sharing) type. The novelty of our result is (i) in the robustness of the optimal contract with respect to…
We give an explicit algorithm and source code for extracting equity risk factors from dead (a.k.a. "flatlined" or "hockey-stick") alphas and using them to improve performance characteristics of good (tradable) alphas. In a nutshell, we use…
Kelly's Criterion is well known among gamblers and investors as a method for maximizing the returns one would expect to observe over long periods of betting or investing. These ideas are conspicuously absent from portfolio optimization…
The Sharpe ratio is the most widely used risk metric in the quantitative finance community - amazingly, essentially everyone gets it wrong. In this note, we will make a quixotic effort to rectify the situation.
We give an explicit algorithm and source code for extracting expected returns for stocks from expected returns for alphas. Our algorithm altogether bypasses combining alphas with weights into "alpha combos". Simply put, we have developed a…
Empirical studies indicate the existence of long range dependence in the volatility of the underlying asset. This feature can be captured by modeling its return and volatility using functions of a stationary fractional Ornstein--Uhlenbeck…