27,967 research outputs found
Efficient Portfolio Selection
Merak believed that an efficient frontier analysis method that combined the robustness of the Monte Carlo approach with the confidence of the Markowitz approach would be a very powerful tool for any industry. However, it soon became clear that there are other ways to address the problem that do not require a Monte Carlo component.
Three subgroups were formed, and each developed a different approach for solving the problem. These were the Portfolio Selection Algorithm Approach, the Statistical Inference Approach, and the Integer Programming Approach
Recommended from our members
Finite Horizon Portfolio Selection
We study the problem of maximising expected utility of terminal wealth
over a nite horizon, with one risky and one riskless asset available, and
with trades in the risky asset subject to proportional transaction costs.
In a discrete time setting, using a utility function with hyperbolic risk
aversion, we prove that the optimal trading strategy is characterised by
a function of time (t), which represents the ratio of wealth held in the
risky asset to that held in the riskless asset. There is a time varying no
transaction region with boundaries b(t) < s(t), such that the portfo-
lio is only rebalanced when (t) is outside this region. The results are
consistent with similar studies of the in nite horizon problem with in-
termediate consumption, where the no transaction region has a similar,
but time independent, characterisation. We solve the problem numerically
and compute the boundaries of the no transaction region for typical model
parameters. We show how the results can be used to implement option
pricing models with transaction costs based on utility maximisation over
a nite horizo
Optimal portfolio selection for cash-flows with bounded capital at risk.
Optimal; Optimal portfolio selection; Portfolio; Selection; Cash flow; Capital at risk; Risk;
Pricing exotic options under local volatility.
Optimal; Optimal portfolio selection; Portfolio; Selection; Cash flow; Capital at risk; Risk; Pricing; Options;
Portfolio selection using neural networks
In this paper we apply a heuristic method based on artificial neural networks
in order to trace out the efficient frontier associated to the portfolio
selection problem. We consider a generalization of the standard Markowitz
mean-variance model which includes cardinality and bounding constraints. These
constraints ensure the investment in a given number of different assets and
limit the amount of capital to be invested in each asset. We present some
experimental results obtained with the neural network heuristic and we compare
them to those obtained with three previous heuristic methods.Comment: 12 pages; submitted to "Computers & Operations Research
Defensive online portfolio selection
The class of defensive online portfolio selection algorithms,designed for fi nite investment horizon, is introduced. The Game Constantly Rebalanced Portfolio and the Worst Case Game Constantly Rebalanced Portfolio, are presented and theoretically analyzed. The analysis exploits the rich set of mathematical tools available by means of the connection between Universal Portfolios and the Game- Theoretic framework. The empirical performance of the Worst Case Game Constantly Rebalanced Portfolio algorithm is analyzed through numerical experiments concerning the FTSE 100, Nikkei 225, Nasdaq 100 and S&P500 stock markets for the time interval, from January 2007 to December 2009, which includes the credit crunch crisis from September 2008 to March 2009. The results emphasize the relevance of the proposed online investment algorithm which signi fi cantly outperformed the market index and the minimum variance Sharpe-Markowitz’s portfolio.on-line portfolio selection; universal portfolio; defensive strategy
Age dependent portfolio selection
This paper addresses the issue of portfolio risk exposure as a function of age, and it focuses the debate by presenting detailed cross-sectional evidence about individual portfolios. It provides new empirical results that characterized the relationship between age and the risk exposure of individual portfolios. The evidence from cross-sectional data suggests that individuals do not follow behavior proscribed by economic theory or by Wall Street advisors, rather the results of this paper suggest that current body of theoretical literature does not adequately describe the behavior of individuals. It implies that a satisfactory model ofindividual behavior needs to focus on factors not linearly correlated with age.Demography ; Saving and investment
Unified Framework of Mean-Field Formulations for Optimal Multi-period Mean-Variance Portfolio Selection
The classical dynamic programming-based optimal stochastic control methods
fail to cope with nonseparable dynamic optimization problems as the principle
of optimality no longer applies in such situations. Among these notorious
nonseparable problems, the dynamic mean-variance portfolio selection
formulation had posted a great challenge to our research community until
recently. A few solution methods, including the embedding scheme, have been
developed in the last decade to solve the dynamic mean-variance portfolio
selection formulation successfully. We propose in this paper a novel mean-field
framework that offers a more efficient modeling tool and a more accurate
solution scheme in tackling directly the issue of nonseparability and deriving
the optimal policies analytically for the multi-period mean-variance-type
portfolio selection problems
- …