Optimal trading strategies for pairs trading have been studied by models that try to find either optimal shares of stocks by assuming no transaction costs or optimal timing of trading fixed numbers of shares of stocks with transaction costs. To find optimal strategies that determine optimally...

Markowitz’s celebrated mean-variance portfolio optimization theory assumes that the means and covariances of the underlying asset returns are known. In practice, they are unknown and have to be estimated from historical data. Plugging the estimates into the efficient frontier that assumes...

Risk management technology applied to high dimensional portfolios needs simple and fast methods for calculation of Value-at-Risk (VaR). The multivariate normal framework provides a simple off-the-shelf methodology but lacks the heavy tailed distributional properties that are observed in data. A...

This paper examines how households should optimally allocate their portfolio choices between risky stocks and risk-free bonds over their lifetime. Traditional lifecycle models in previous work suggest that the allocation toward stocks should start high (near 100%) early in life and decline over...

We derive an explicit solution for deterministic market impact parameters in the Graewe and Horst (2017) portfolio liquidation model. The model allows to combine various forms of market impact, namely instantaneous, permanent and temporary. We show that the solutions to the two benchmark models...

We consider an optimal liquidation model in which an investor is required to execute meta-orders during intraday trading periods, and his trading activity triggers child orders and endogenously affects future order flow, both instantaneously and permanently. Under the assumptions of risk...