Download or read book Application of Regime Switching and Random Matrix Theory for Portfolio Optimization written by Javed Iqbal and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Random Matrix Theory with Applications in Statistics and Finance written by Nadia Abdel Samie Basyouni Kotb Saad and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis investigates a technique to estimate the risk of the mean-variance (MV) portfolio optimization problem. We call this technique the Scaling technique. It provides a better estimator of the risk of the MV optimal portfolio. We obtain this result for a general estimator of the covariance matrix of the returns which includes the correlated sampling case as well as the independent sampling case and the exponentially weighted moving average case. This gave rise to the paper, [CMcS]. Our result concerning the Scaling technique relies on the moments of the inverse of compound Wishart matrices. This is an open problem in the theory of random matrices. We actually tackle a much more general setup, where we consider any random matrix provided that its distribution has an appropriate invariance property (orthogonal or unitary) under an appropriate action (by conjugation, or by a left-right action). Our approach is based on Weingarten calculus. As an interesting byproduct of our study - and as a preliminary to the solution of our problem of computing the moments of the inverse of a compound Wishart random matrix, we obtain explicit moment formulas for the pseudo-inverse of Ginibre random matrices. These results are also given in the paper, [CMS]. Using the moments of the inverse of compound Wishart matrices, we obtain asymptotically unbiased estimators of the risk and the weights of the MV portfolio. Finally, we have some numerical results which are part of our future work.

Download or read book Applications of Random Matrix Theory to Portfolio Management and Financial Networks written by Nicolas Eterovic and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Portfolio optimization based on random matrix theory written by and published by . This book was released on with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Xii, 54 p. : ill. ; 30 cm.

Download or read book Advanced Composite Materials written by Wen Zhe Chen and published by Trans Tech Publications Ltd. This book was released on 2012-02-27 with total page 2790 pages. Available in PDF, EPUB and Kindle. Book excerpt: This extensive collection of papers constitutes an invaluable source of information covering the current state of the art with regard to manufacturing science and engineering, and focussing on Advanced Composite Materials. These 534 peer-reviewed papers are grouped into 12 chapters: CAD/CAM; Ceramic-Matrix Composites; Coatings, Damage Mechanics; Design of Materials and Components, Environmental Effects; Metal-Matrix Composites; Modelling; Non-Destructive Evaluation; Polymer-Matrix Composites; Processing and Manufacturing, Properties and Performance; Prototyping Reinforcement Materials, Repair, Testing; Thermoplastic Composites; Nanotechnology.

Download or read book Seminar on Stochastic Analysis Random Fields and Applications VII written by Robert C. Dalang and published by Springer Science & Business Media. This book was released on 2013-09-05 with total page 470 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume contains refereed research or review articles presented at the 7th Seminar on Stochastic Analysis, Random Fields and Applications which took place at the Centro Stefano Franscini (Monte Verità) in Ascona , Switzerland, in May 2011. The seminar focused mainly on: - stochastic (partial) differential equations, especially with jump processes, construction of solutions and approximations - Malliavin calculus and Stein methods, and other techniques in stochastic analysis, especially chaos representations and convergence, and applications to models of interacting particle systems - stochastic methods in financial models, especially models for power markets or for risk analysis, empirical estimation and approximation, stochastic control and optimal pricing. The book will be a valuable resource for researchers in stochastic analysis and for professionals interested in stochastic methods in finance.​

Download or read book Asset Allocation Using Regime Switching Methods written by Sarthak Garg and published by . This book was released on 2016 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The aim of this thesis is to develop a Markov Regime Switching framework that can be used in asset allocation in conjunction with Modern Portfolio Theory. Modern Portfolio Theory has long been a popular tool among big financial institutions. However, one of its major limitations is assumption of stationary market volatility. In this paper, we develop a single period Mean Variance Optimization model that minimizes the variance of a portfolio subject to a specified expected return by combining Modern Portfolio Theory with a Markov Regime Switching framework. Then, we extend the above developed framework to be used in conjunction with a robust optimization framework as proposed by Goldfarb Iyengar in which regards we were partially successful. The portfolios constructed by the Markov Regime-Switching framework were tested out of sample to outperform those suggested by a Simple MVO One Factor model and the Robust MVO One Factor Model.

Download or read book A Regime Switching Factor Model for Mean Variance Optimization written by Giorgio Costa and published by . This book was released on 2020 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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 parameters are calibrated to better describe the properties of the different market regimes. In turn, these regime-dependent parameters serve as the inputs during mean-variance optimization, thereby constructing portfolios adapted to the current market environment. Through this formulation, the proposed model allows for the construction of large, realistic portfolios at no additional computational cost during optimization. Moreover, the viability of this model can be significantly improved by periodically re-balancing the portfolio, ensuring proper alignment between the estimated parameters and the transient market regimes. An out-of-sample computational experiment over a long investment horizon shows that the proposed regime-dependent portfolios are better aligned with the market environment, yielding a higher ex post rate of return and lower volatility than competing portfolios.

Download or read book Can Random Matrix Theory Resolve Markowitz Optimization Enigma written by Kim Wah Ng and published by . This book was released on 2014 with total page 165 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Convex Duality in Constrained Mean variance Portfolio Optimization Under a Regime switching Model written by Catherine Donnelly and published by . This book was released on 2008 with total page 203 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this thesis, we solve a mean-variance portfolio optimization problem with portfolio constraints under a regime-switching model. Specifically, we seek a portfolio process which minimizes the variance of the terminal wealth, subject to a terminal wealth constraint and convex portfolio constraints. The regime-switching is modeled using a finite state space, continuous-time Markov chain and the market parameters are allowed to be random processes. The solution to this problem is of interest to investors in financial markets, such as pension funds, insurance companies and individuals. We establish the existence and characterization of the solution to the given problem using a convex duality method. We encode the constraints on the given problem as static penalty functions in order to derive the primal problem. Next, we synthesize the dual problem from the primal problem using convex conjugate functions. We show that the solution to the dual problem exists. From the construction of the dual problem, we find a set of necessary and sufficient conditions for the primal and dual problems to each have a solution. Using these conditions, we can show the existence of the solution to the given problem and characterize it in terms of the market parameters and the solution to the dual problem. The results of the thesis lay the foundation to find an actual solution to the given problem, by looking at specific examples. If we can find the solution to the dual problem for a specific example, then, using the characterization of the solution to the given problem, we may be able to find the actual solution to the specific example. In order to use the convex duality method, we have to prove a martingale representation theorem for processes which are locally square-integrable martingales with respect to the filtration generated by a Brownian motion and a finite state space, continuous-time Markov chain. This result may be of interest in problems involving regime-switching models which require a martingale representation theorem.

Download or read book APPLICATION OF RANDOM MATRIX THEORY FOR FINANCIAL MARKET SYSTEMS written by Michael Jonathan Witte and published by . This book was released on 2014 with total page 74 pages. Available in PDF, EPUB and Kindle. Book excerpt: The stock market plays a prominent role in the economy, used as both as an investment area to make wealth and as an overall indicator of its health. Thus, people have been trying to organize and predict the stock market and which stocks would be winners as seen by Peter Sander [1]. Research by Mantegna [2] and Onnela [3] showed that the market has a clear structure and could be represented as Minimal Spanning Trees. Qian [4] reported that the Hurst Exponent, a modeling method of correlation, could be applied to the study of financial markets. This study seeks to model these methods and utilizing Random Matrix Theory, determine whether these methods are valid and, if possible, applicable to a smaller subset of stocks. After review of the gathered data, it was found that while the Hurst Exponent and Minimal Spanning Trees do show structure, they cannot accurately predict future stock performance. In addition, there is no benefit to following a small group of stocks verse the market as a whole with the only exception being the index.

Download or read book Asset Pricing and Portfolio Optimization Under Regime Switching Models written by Yang Shen and published by . This book was released on 2014 with total page 157 pages. Available in PDF, EPUB and Kindle. Book excerpt: Regime-switching models are very useful to describe structural changes in macro-economic conditions, periodical fluctuations in business cycles and sudden transitions in market modes. In this these, a continuous-time, finite-state, observable Markov chain is adopted to model the regime switches. The first part of the thesis is devoted to asset pricing problems under regime-switching models. In the second part stochastic optimal control theory is applied to explore portfolio optimization problems under regime-switching models.

Download or read book Extreme Events written by Malcolm Kemp and published by John Wiley & Sons. This book was released on 2011-10-04 with total page 337 pages. Available in PDF, EPUB and Kindle. Book excerpt: Taking due account of extreme events when constructing portfolios of assets or liabilities is a key discipline for market professionals. Extreme events are a fact of life in how markets operate. In Extreme Events: Robust Portfolio Construction in the Presence of Fat Tails, leading expert Malcolm Kemp shows readers how to analyse market data to uncover fat-tailed behaviour, how to incorporate expert judgement in the handling of such information, and how to refine portfolio construction methodologies to make portfolios less vulnerable to extreme events or to benefit more from them. This is the only text that combines a comprehensive treatment of modern risk budgeting and portfolio construction techniques with the specific refinements needed for them to handle extreme events. It explains in a logical sequence what constitutes fat-tailed behaviour and why it arises, how we can analyse such behaviour, at aggregate, sector or instrument level, and how we can then take advantage of this analysis. Along the way, it provides a rigorous, comprehensive and clear development of traditional portfolio construction methodologies applicable if fat-tails are absent. It then explains how to refine these methodologies to accommodate real world behaviour. Throughout, the book highlights the importance of expert opinion, showing that even the most data-centric portfolio construction approaches ultimately depend on practitioner assumptions about how the world might behave. The book includes: Key concepts and methods involved in analysing extreme events A comprehensive treatment of mean-variance investing, Bayesian methods, market consistent approaches, risk budgeting, and their application to manager and instrument selection A systematic development of the refinements needed to traditional portfolio construction methodologies to cater for fat-tailed behaviour Latest developments in stress testing and back testing methodologies A strong focus on the practical implementation challenges that can arise at each step in the process and on how to overcome these challenges “Understanding how to model and analyse the risk of extreme events is a crucial part of the risk management process. This book provides a set of techniques that allow practitioners to do this comprehensively.” Paul Sweeting, Professor of Actuarial Science, University of Kent “How can the likeliness of crises affect the construction of portfolios? This question is highly topical in times where we still have to digest the last financial collapse. Malcolm Kemp gives the answer. His book is highly recommended to experts as well as to students in the financial field.” Christoph Krischanitz, President Actuarial Association of Austria, Chairman WG “Market Consistency” of Groupe Consultatif

Download or read book Portfolio Optimization a Combined Regime switching and Black Litterman Model written by Edwin O. Fischer and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Optimal Asset Allocation Problems Under the Discrete Time Regime Switching Model written by Ka-Chun Cheung and published by . This book was released on 2017-01-26 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation, "Optimal Asset Allocation Problems Under the Discrete-time Regime-switching Model" by Ka-chun, Cheung, 張家俊, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. Abstract: Abstract of the thesis entitled OPTIMAL ASSET ALLOCATION PROBLEMS UNDER THE DISCRETE-TIME REGIME-SWITCHING MODEL submitted by Cheung, Ka Chun for the degree of Doctor of Philosophy at The University of Hong Kong in January 2005 Recently, academics and practitioners have started paying attention to using the Markov Regime-Switching process to model asset price dynamics. The Markov Regime-Switchingmodelcancapturetherealitythattheinvestmentenvironment is changing over time and hence is non-stationary. Another merit of the model is that it can provide a reasonable degree of analytical tractability. In this thesis, the optimal behavior of an investor in a Markov regime-switching environment will be examined. The thesis studies the optimal dynamic asset allocation strategy, the optimal consumption strategy in the presence of default risk, and the optimal surrender strategy of an equity-linked investment product. By employing the concept of stochastic dominance and assuming that the transition matrix is stochasticallymonotone, where both the concept and assumption have natural and appealing financial interpretations, it was shown that the optimal behavior of the investor is consistent with our intuition. As default risk is an important subject in mod- ern finance and actuarial science, this thesis also studies the optimal portfolio problem in which financial instruments are subject to dependent default risks. Sufficient condition to order the optimal allocations was obtained. The analy- sis demonstrates that in the optimal portfolio problem context, the dependency structure between the default risks is essential and cannot be ignored. DOI: 10.5353/th_b3131123 Subjects: Asset allocation - Mathematical models Markov processes

Download or read book Factor and Industry Allocation Using Markov Switching Model written by Saurabh Gokhale and published by . This book was released on 2019 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose to separate returns and macro-indicators into regimes and use regime-specific mean returns and covariances for better portfolio construction. We fit a multivariate Gaussian mixture process to observable regime indicators along with a Hidden Markov Model for the unobservable state. We then use the fitted regimes and transition matrix to construct different portfolios based on a probability-weighted average of returns and covariances. Our backtesting uses long-short factor returns as well as industry returns. We find the evidence that regime aware optimizations perform better than the popular mean-variance optimization without assumptions of regimes and has higher out-of-sample expected return and lower skewness, kurtosis, and drawdowns.

Download or read book The Oxford Handbook of Quantitative Asset Management written by Bernd Scherer and published by Oxford University Press. This book was released on 2012 with total page 530 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book explores the current state of the art in quantitative investment management across seven key areas. Chapters by academics and practitioners working in leading investment management organizations bring together major theoretical and practical aspects of the field.