In modern portfolio theory, financial portfolios are characterised by a desired property, the ‘reward’, and something undesirable, the ‘risk’. While these properties are commonly identified with mean and variance of returns, respectively, we test alternative specifications like partial...

Linear regression is widely-used in finance. While the standard method to obtain parameter estimates, Least Squares, has very appealing theoretical and numerical properties, obtained estimates are often unstable in the presence of extreme observations which are rather common in financial time...

There is a large number of optimisation problems in theoretical and applied finance that are difficult to solve as they exhibit multiple local optima or are not ‘well- behaved’ in other ways (eg, discontinuities in the objective function). One way to deal with such problems is to adjust and...

We construct portfolios with an alternative selection criterion, the Omega function, which can be expressed as the ratio of two partial moments of the returns distribution. Finding Omega-optimal portfolios, in particular under realistic constraints like cardinality restrictions, requires to...

An alleged weakness of heuristic optimisation methods is the stochastic character of their solutions. That is, instead of finding a truly optimal solution, they only provide a stochastic approximation of this optimum. In this paper we look into a particular application, portfolio optimisation....