In this paper, we propose a method for hedge fund replication using a factor-based model supplemented with a series of risk and return constraints that implicitly target all the moments of the hedge fund return distribution. We use the approach to replicate the monthly returns of ten broad hedge...

Protecting portfolio against extreme losses is a fundamentally difficult task since past experience provides a poor guidance for the future. This paper focuses on a robust approach to the portfolio insurance, which does not require historical calibration, and therefore avoids the hazards of data...

We consider an investor faced with the utility maximization problem in which the risky asset price process has pure-jump dynamics affected by an unobservable continuous-time finite-state Markov chain, the intensity of which can also be controlled by actions of the investor. Using the classical...

We study a dynamic portfolio optimization problem related to convergence trading, which is an investment strategy that exploits temporary mispricing by simultaneously buying relatively underpriced assets and selling short relatively overpriced ones with the expectation that their prices converge...

Under mild assumptions, we recover the model-free conditional minimum variance projection of the pricing kernel on various tradeable realized moments of market returns. Recovered conditional moments predict future realizations and give insight into the cyclicality of equity premia, variance risk...

We approach the continuous-time mean-variance (MV) portfolio selection with reinforcement learning (RL). The problem is to achieve the best tradeoff between exploration and exploitation, and is formulated as an entropy-regularized, relaxed stochastic control problem. We prove that the optimal...

We introduce a generic solver for dynamic portfolio allocation problems when the market exhibits return predictability, price impact and partial observability. We assume that the price modeling can be encoded into a linear state-space and we demonstrate how the problem then falls into the LQG...

Spanish Abstract: La relación existente entre el riego y la rentabilidad de un activo financiero es una preocupación constante del inversionista a la hora de conformar su portafolio de inversión. La principal meta en la construcción del portafolio consiste en distribuir óptimamente la...

We consider a large trader liquidating a portfolio using a transparent trading venue with price impact and a dark pool with execution uncertainty. The optimal execution strategy uses both venues continuously, with dark pool orders over-/underrepresenting the portfolio size depending on return...

We introduce a theoretical model of executives with insider information who receive executive stock options (ESOs) as incentives and optimize their “outside wealth” portfolios. We show that insider information nullifies ESO incentivizing, misaligning executives' and shareholders' interests....