Summary Robust utility functionals arise as numerical representations of investor preferences, when the investor is uncertain about the underlying probabilistic model and averse against both risk and model uncertainty. In this paper, we study the duality theory for the problem of maximizing the...

SUMMARY Distorted measures have been used in pricing of insurance contracts for a long time. This paper reviews properties of related acceptability functionals in risk management, called distortion functionals. These functionals may be characterized by being mixtures of average values-at-risk....

We consider the portfolio optimization problem for the criterion of maximization of expected terminal log-utility. The underlying market model is a regime-switching diffusion model where the regime is determined by an unobservable factor process forming a finite state Markov process. The main...

We consider the problem of dynamic portfolio optimization in a discrete-time, finite-horizon setting. Our general model considers risk aversion, portfolio constraints (e.g., no short positions), return predictability, and transaction costs. This problem is naturally formulated as a stochastic...

Classical optimal strategies are notorious for producing remarkably volatile portfolio weights over time when applied with parameters estimated from data. This is predominantly explained by the difficulty to estimate expected returns accurately. In Lindberg (Bernoulli 15:464–474, <CitationRef CitationID="CR10">2009</CitationRef>), a new...</citationref>

We study a stochastic programming approach to multicriteria multi-period portfolio optimization problem. We use a Single Index Model to estimate the returns of stocks from a market-representative index and a random walk model to generate scenarios on the possible values of the index return. We...

We analyze a new fluctuation test for constant correlation with respect to its properties and possible applications in finance. On the one hand, a simulation study examines the properties particularly with regard to a comparison with a previous standard method. On the other hand, we apply the...

This paper deals with the problem of scenario tree reduction for stochastic programming problems. In particular, a reduction method based on cluster analysis is proposed and tested on a portfolio optimization problem. Extensive computational experiments were carried out to evaluate the...