We formulate a novel Markov regime-switching factor model to describe the cyclical nature of asset returns in modern financial markets. Maintaining a factor model structure allows us to easily derive the asset expected returns and their corresponding covariance matrix. By design, these two...

The risk parity solution to the asset allocation problem yields portfolios where the risk contribution from each asset is made equal. We consider a generalized approach to this problem. First, we set an objective that seeks to maximize the portfolio expected return while minimizing portfolio...

This paper formulates a relaxed risk parity optimization model to control the balance of risk parity violation against the total portfolio performance. Risk parity has been criticized as being overly conservative and it is improved by re-introducing the asset expected returns into the model and...

We propose a novel multi-period trading model that allows portfolio managers to perform optimal portfolio allocation while incorporating their interpretable investment views. This model's significant advantage is its intuitive and reactive design that incorporates the latest asset return regimes...

We present a novel technique for cardinality-constrained index-tracking, a common task in the financial industry. Our approach is based on market graph models. We model our reference indices as market graphs and express the index-tracking problem as a quadratic K-medoids clustering problem. We...