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Dynamic Portfolio Optimization with Transaction Costs and State-Dependent Drift

Palczewski, Jan - 2014

We present an efficient numerical method to determine optimal portfolio strategies under time- and state-dependent drift and proportional transaction costs. This scenario arises when investors have behavioral biases or the actual drift is unknown and needs to be estimated. The numerical method...

Persistent link: https://www.econbiz.de/10013062391

Credit Risk Modeling Through the Use of an Extended and Numerically Stable Version of CreditRisk and a Merton Model

Dubrana, Ludovic - 2011

Accessing and managing credit risk has been a major area of interest and concern for both academics, practitioners and regulators, particularly in the afterwards of the recent 2008 financial crisis. Moreover, the effective management of credit risk is a challenge faced by any banking and...

Persistent link: https://www.econbiz.de/10013118119

Equity Duration : Theoretical and Practical Analysis

Montagna, Dennis Marco; Bianchi, Luca - 2022

Duration is an important parameter used by investors to choose between different investment opportunities in financial economics. While the concept of duration is usually associated with fixed-income assets, its expansion to the equity assets is becoming more relevant in the recent period, due...

Persistent link: https://www.econbiz.de/10014239113

Demystifying Rebalancing Premium : A Methodological Path to Risk Premia Engineering

Dubikovsky, Vladislav - 2015

Volatility is usually considered as a synonym for risk. Mainstream financial theory states that higher portfolio … framework that encompasses various investment styles and portfolio construction methodologies. Modern Portfolio Theory is a one … theory. We show that Markowitz portfolios and Warren Buffett's investment style are valid special cases of optimal growth …

Persistent link: https://www.econbiz.de/10013018815

Machine Learning and the Implementable Efficient Frontier

Jensen, Theis Ingerslev; Kelly, Bryan T.; Malamud, Semyon; … - 2022

We propose that investment strategies should be evaluated based on their net-of-trading-cost return for each level of risk, which we term the "implementable efficient frontier." While numerous studies use machine learning return forecasts to generate portfolios, their agnosticism toward trading...

Persistent link: https://www.econbiz.de/10013492674

Optimising Asset Allocation between Hedge Funds and Private Equity

Susinno, Gabriele - 2015

This paper explores the optimisation of asset allocation within “alternative” investments, i.e. between private equity and hedge funds, as well as between private equity and public equities. It uses our proprietary Portfolio Blender tool. As a preliminary step before the optimisation, we...

Persistent link: https://www.econbiz.de/10013018806

Dynamic Portfolio Optimization with Liquidity Cost and Market Impact : A Simulation-and-Regression Approach

Zhang, Rongju - 2018

We present a simulation-and-regression method for solving dynamic portfolio optimization problems in the presence of general transaction costs, liquidity costs and market impact. This method extends the classical least squares Monte Carlo algorithm to incorporate switching costs, corresponding...

Persistent link: https://www.econbiz.de/10012936715

Dynamic Tracking Error with Shortfall Control Using Stochastic Programming

Barro, Diana; Canestrelli, Elio - 2012

In this contribution we propose a dynamic tracking error problem and we consider the problem of monitoring at discrete point the shortfall of the portfolio below a set of given reference levels of wealth. We formulate and solve the resulting dynamic optimization problem using stochastic...

Persistent link: https://www.econbiz.de/10014040374

Single- and Multi-Period Portfolio Optimization with Cone Constraints and Discrete Decisions

Saglam, Ümit - 2019

Portfolio optimization literature has come quite far in the decades since the first publication, and many modern models are formulated using second-order cone constraints and take discrete decisions into consideration. In this study, we consider both single-period and multi-period portfolio...

Persistent link: https://www.econbiz.de/10012903029

Chapter 8. Advances in Numerical Dynamic Programming and New Applications

Cai, Yongyang; Judd, Kenneth L. - In: Handbook of computational economics : volume 3, (pp. 479-516). 2014

Dynamic programming is the essential tool in dynamic economic analysis. Problems such as portfolio allocation for individuals and optimal economic growth are typical examples. Numerical methods typically approximate the value function. Recent work has focused on making numerical methods more...

Persistent link: https://www.econbiz.de/10014025714