Search results for "Portfolio optimization"
showing 10 items of 48 documents
A Unified Approach to Portfolio Optimization with Linear Transaction Costs
2004
In this paper we study the continuous time optimal portfolio selection problem for an investor with a finite horizon who maximizes expected utility of terminal wealth and faces transaction costs in the capital market. It is well known that, depending on a particular structure of transaction costs, such a problem is formulated and solved within either stochastic singular control or stochastic impulse control framework. In this paper we propose a unified framework, which generalizes the contemporary approaches and is capable to deal with any problem where transaction costs are a linear/piecewise-linear function of the volume of trade. We also discuss some methods for solving numerically the p…
A Simulation Analysis of the Microstructure of an Order Driven Financial Market with Multiple Securities and Portfolio Choices
2005
In this paper we propose an artificial market where multiple risky assets are exchanged. Agents are constrained by the availability of resources and trade to adjust their portfolio according to an exogenously given target portfolio. We model the trading mechanism as a continuous auction order-driven market. Agents are heterogeneous in terms of desired target portfolio allocations, but they are homogeneous in terms of trading strategies. We investigate the role played by the trading mechanism in affecting the dynamics of prices, trading volume and volatility. We show that the institutional setting of a double auction market is sufficient to generate a non-normal distribution of price changes…
A fuzzy ranking strategy for portfolio selection applied to the Spanish stock market
2007
In this paper we present a fuzzy ranking procedure for the portfolio selection problem. The uncertainty on the returns of each portfolio is approximated by means of a trapezoidal fuzzy number. The expected return and risk of the portfolio are then characteristics of that fuzzy number. A rank index that accounts for both expected return and risk is defined, allowing the decision-maker to compare different portfolios. The paper ends with an application of that fuzzy ranking strategy to the Spanish stock market.
A multi-objective genetic algorithm for cardinality constrained fuzzy portfolio selection
2012
This paper presents a new procedure that extends genetic algorithms from their traditional domain of optimization to fuzzy ranking strategy for selecting efficient portfolios of restricted cardinality. The uncertainty of the returns on a given portfolio is modeled using fuzzy quantities and a downside risk function is used to describe the investor's aversion to risk. The fitness functions are based both on the value and the ambiguity of the trapezoidal fuzzy number which represents the uncertainty on the return. The soft-computing approach allows us to consider uncertainty and vagueness in databases and also to incorporate subjective characteristics into the portfolio selection problem. We …
Fuzzy portfolio optimization under downside risk measures
2007
This paper presents two fuzzy portfolio selection models where the objective is to minimize the downside risk constrained by a given expected return. We assume that the rates of returns on securities are approximated as LR-fuzzy numbers of the same shape, and that the expected return and risk are evaluated by interval-valued means. We establish the relationship between those mean-interval definitions for a given fuzzy portfolio by using suitable ordering relations. Finally, we formulate the portfolio selection problem as a linear program when the returns on the assets are of trapezoidal form.
An Open Innovation Decision Support System to Select a Biopharmaceutical R&D Portfolio
2015
Drugs available in the market today, selected several years ago under very uncertain future scenario, have experienced a long and expensive process of research and development carried out following both a closed and an open innovation path. To support this critical selection process, we propose a Decision Support System, able to choose among different candidates the most promising drugs along their best development path. The Decision Support System, based on a real options portfolio optimization model, mapping tools, and what-if rules as well, has been applied to a numerical example available in literature, and the research findings show interesting managerial and academic implications. Cop…
Risk management optimization for sovereign debt restructuring
2015
Debt restructuring is one of the policy tools available for resolving sovereign debt crises and, while unorthodox, it is not uncommon. We propose a scenario analysis for debt sustainability and integrate it with scenario optimization for risk management in restructuring sovereign debt. The scenario dynamics of debt-to-GDP ratio are used to define a tail risk measure, termed "conditional Debt-at-Risk". A multi-period stochastic programming model minimizes the expected cost of debt financing subject to risk limits. It provides an operational model to handle significant aspects of debt restructuring: it collects all debt issues in a common framework, and can include contingent claims, multiple…
Optimal Dynamic Portfolio Risk Management
2016
Numerous econometric studies report that financial asset volatilities and correlations are time-varying and predictable. Over the past decade, this knowledge has stimulated increasing interest in various dynamic portfolio risk control techniques. The two basic types of risk control techniques are: risk control across assets and risk control over time. At present, the two types of risk control techniques are not implemented simultaneously. There has been surprisingly little theoretical study of optimal dynamic portfolio risk management. In this paper, the author fills this gap in the literature by formulating and solving the multi-period portfolio choice problem. In terms of dynamic portfoli…