This paper discusses the application of an index tracking technique to mutual fund replication problems. By using a tracking error (TE) minimization method and two tactical rebalancing strategies (i.e. the calendar based strategy and the tolerance triggered strategy), a multi-period fund...

In recent years, copulas have become very popular in financial research and actuarial science as they are more flexible in modelling the co-movements and relationships of risk factors as compared to the conventional linear correlation coefficient by Pearson. However, a precise estimation of the...

This paper proposes a clustering asset allocation scheme which provides better risk-adjusted portfolio performance than those obtained from traditional asset allocation approaches such as the equal weight strategy and the Markowitz minimum variance allocation. The clustering criterion used,...

Copulae provide investors with tools to model the dependency structure among financial products. The choice of copulae plays an important role in successful copula applications. However, selecting copulae usually relies on general goodness-of-fit (GoF) tests which are independent of the...

The problem of forecasting from vector autoregressive models has attracted considerable attention in the literature. The most popular non-Bayesian approaches use large sample normal theory or the bootstrap to evaluate the uncertainty associated with the forecast. The literature has concentrated...

This study presents a first comparative analysis of Lasso-type (Lasso, adaptive Lasso, elastic net) and heuristic subset selection methods. Although the Lasso has shown success in many situations, it has some limitations. In particular, inconsistent results are obtained for pairwise strongly...

Stochastic programming provides a versatile framework for decision-making under uncertainty, but the resulting optimization problems can be computationally demanding. It has recently been shown that, primal and dual linear decision rule approximations can yield tractable upper and lower bounds...

The concept of a flexible region describes an infinite variety of symmetrical shapes to enclose a particular region of interest within a space. In experimental design, the properties of a function on the region of interest is analyzed based on a set of design points. The choice of design points...

We present a primal-dual interior-point method for constrained nonlinear, discrete minimax problems where the objective functions and constraints are not necessarily convex. The algorithm uses two merit functions to ensure progress toward the points satisfying the first-order optimality...