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Factor Risk Parity with Portfolio Weight Constraints

Erling, Marco - 2016

Handling risk factors in the context of a multi-asset risk parity portfolio allocation has created increased interest in recent literature. When allocating along risk factors through principal components, one major problem that persists is the potential existence of leverage or short positions...

Persistent link: https://www.econbiz.de/10013004601

Trade Duration Risk in Subdiffusive Financial Models

Torricelli, Lorenzo - 2019

Subdiffusive processes can be used in finance to explicitly accommodate the presence of random waiting times between trades or "duration", which in turn allows the modelling of price staleness effects. Option pricing models based on subdiffusions are incomplete, as they naturally account for the...

Persistent link: https://www.econbiz.de/10012893104

Feasible Implied Correlation Matrices from Factor Structures

Schadner, Wolfgang - 2021

Forward-looking correlations are of interest in different financial applications, including factor-based asset pricing, forecasting stock-price movements or pricing index options. With a focus on non-FX markets, this paper defines necessary conditions for option implied correlation matrices to...

Persistent link: https://www.econbiz.de/10013219438

An Application of the Arrhenius Equation in Portfolio Modeling

Floros, Christos; Gkillas, Konstantinos; Kountzakis, … - 2021

The aim of this paper is to provide a modeling of capital transfer between a portfolio consisted by two assets. For …

Persistent link: https://www.econbiz.de/10013235140

Entropy Approach to Incorporate Fat Tailed Constraints in Financial Models

Dey, Santanu - 2010

In the existing financial literature, entropy based ideas have been proposed in portfolio optimization and in model calibration for options pricing. The abstracted problem corresponds to finding a probability measure that minimizes Kullbach-Leibler (KL) distance with respect to a known measure...

Persistent link: https://www.econbiz.de/10013140006

Shadow Probability Theory for Asset Pricing under Ambiguity

Izhakian, Yehuda (Yud) - 2011

under ambiguity, called Shadow probability theory, a generalization of the Choquet expected utility. In this model … space. Risk and risk attitude, on the other hand, apply to the subordinated space, as in classical expected utility theory … the classical asset pricing theory by incorporating ambiguous probabilities. It proposes a well defined ambiguity premium …

Persistent link: https://www.econbiz.de/10013119880

Information Differential and Compensation of Active Fund Managers

Ezzili, Chekib - 2012

We posit a fund manager and an individual investor who maximize the expected (log) utility of their respective terminal wealth. The manager possesses more information than the investor does and charges the latter, her would-be customer, a linear compensation fee. The investor will delegate his...

Persistent link: https://www.econbiz.de/10013102145

Investment Approach to Credit Risk Management at Commercial Banks Using Stochastic Dominance Algorithm

Trifonov, Yuriy - 2014

supplementing them with the voting theory elements. The developed stochastic dominance algorithm is based on an investment approach …

Persistent link: https://www.econbiz.de/10013060002

Portfolio Management Framework for Derivative Instruments

Vorobets, Anton - 2022

The investment industry lacks an unified framework for handling derivative instruments in general portfolio management. With the increased use of derivatives, there is a need for a framework that aligns fundamental terminology and concepts. The main challenges with the current practices are...

Persistent link: https://www.econbiz.de/10014236873

Searching for information

Han, Jungsuk; Sangiorgi, Francesco - 2015

This paper provides a microfounded information acquisition technology based on a simple framework with information search. When searchable information is limited, an agent encounters increasingly more redundant information in his search for new information. Redundancy slows down the learning...

Persistent link: https://www.econbiz.de/10010529422