We consider dynamic asset allocation problems where the agent is required to pay capital gains taxes on her investment gains. This is a very challenging problem because the tax owed whenever a security is sold depends on the cost-basis, i.e. the price(s) at which the shares of the security was...

In this paper we propose a novel application of Gaussian processes (GPs) to financial asset allocation. Our approach is deeply rooted in Stochastic Portfolio Theory (SPT), a stochastic analysis framework introduced by Robert E. Fernholz that aims at flexibly analysing the performance of certain...

We develop scenario-based stochastic programming models for hedging the risks of international portfolios using options. The models provide an increasing level of integration in managing market and foreign exchange (FX) risks. We start with a single-stage model with currency options for...

The Black Litterman (BL) model for portfolio optimization combines investors' expectations with the Markowitz framework. The BL model is designed for investors with private information or with knowledge of market behavior. In this paper I propose a method where investors' expectations are based...

This paper proposes a novel scheme for achieving high investment performances with Mean-Variance (MV) portfolios. As is well-known, MV portfolio performances largely depend on the quality of estimates of parameters, namely expected returns and covariance matrices. Particularly, easily...

This paper applies specific quantitative methods to demonstrate a general theoretical model for measuring strategic performance. The theoretical concepts are universal and measurable for all types of strategic activity by applying the methodology through alternative quantitative analytical...

Assuming that probabilities (capacities) of events are random, this paper introduces a novel model of decision making under ambiguity, called Shadow probability theory, a generalization of the Choquet expected utility. In this model, probabilities of observable events in a subordinated...

We compare the equal-weight naive 1/N portfolio with mean-variance strategies from the perspective of mispricing (alpha) and provide three new findings. First, we analytically show that the 1/N rule approaches the ex ante mean-variance efficient portfolio in the absence of mispricing. With...

We derive sufficient conditions for non-emptyness of the efficient set for Stochastic Dominance Relations, commonly applied in Economics and Finance, over sets of distributions on the real line. We do so via the use of the concept of stochastic spanning and its characterization via a saddle type...

Standard mean-variance analysis is based on the assumption of normal return distributions. However, a growing body of literature suggests that the market oscillates between two different regimes – one with low volatility and the other with high volatility. In such a case, even if the return...