In this paper it is analyzed whether a Fourier based approach can be an efficient tool for calculating risk measures in the context of a credit portfolio model with integrated market risk factors. For this purpose, this technique is applied to a version of the well-known credit portfolio model CreditMetrics extended by correlated interest rate and credit spread risk. Unfortunately, the characte...

In this paper we start off by reviewing the literature on how to extend the meanvariance portfolio model to multi-stage portfolio problems. We then apply a multiperiod portfolio selection model to power generation assets, which is based on a reallocation methodology with scenario tree. Two solution approaches are used: the multi-period rebalancing model and the global solution one. These approa...

We construct a deep portfolio theory. By building on Markowitz’s classic risk-return trade-off, we develop a self-contained four-step routine of encode, calibrate, validate and verify to formulate an automated and general portfolio selection process. At the heart of our algorithm are deep hierarchical compositions of portfolios constructed in the encoding step. The calibration step then provide...

The presence of options in a portfolio fundamentally alters the portfolio’s risk and return profiles when compared to an all equity portfolio. In this paper, we advocate modeling a risk-based criterion for optioned portfolio selection and rebalancing problems. The criterion is inspired by Chicago Mercantile Exchange’s risk-based margining system which sets the collateralization requirements on ...

Recently, different methods have been proposed for portfolio optimization and decision making on investment issues. This article aims to present a new method for portfolio formation based on Data Envelopment Analysis (DEA) and Entropy function. This new portfolio optimization method applies DEA in association with a model resulting from the insertion of the Entropy function directly into the op...

Due to the illiquidity of inventories pledged, the essential of price risk management of supply chain finance is to long-term price risk measure. Long memory in volatility, which attests a slower than exponential decay in the autocorrelation function of standard proxies of volatility, yields an additional improvement in specification of multi-period volatility models and further impact on the t...

The relevant literature showed that many heuristic techniques have been investigated for constrained portfolio optimization problem but none of these studies presents multi-objective Scatter Search approach. In this work, we present a hybrid multi-objective population-based evolutionary algorithm based on Scatter Search with an external archive to solve the constrained portfolio selection probl...

1 We present efficient partial differential equation (PDE) methods for continuous time mean2 variance portfolio allocation problems when the underlying risky asset follows a stochastic 3 volatility process. The standard formulation for mean variance optimal portfolio allocation 4 problems gives rise to a two-dimensional non-linear Hamilton-Jacobi-Bellman (HJB) PDE. We 5 use a wide stencil metho...

This work gives a brief overview of the portfolio selection problem following the mean-risk approach first proposed by Markowitz (1952). We consider various risk measures, i.e. variance, value-at-risk and expected-shortfall and we study the efficient frontiers obtained by solving the portfolio selection problem under these measures. We show that under the assumption that returns are normally di...

According to Markowitz (1952) portfolio theory assumed that the investor has a concave utility function that expresses an attitude of risk aversion and managed to put portfolio selection based on two criteria, mean and variance. Other studies have improved this approach and following Basel II recommendations by using Value-at-Risk (VaR) as a standard risk measure in finance, Alexander & Baptist...