scholarly journals Optimal Portfolio Strategy under Rolling Economic Maximum Drawdown Constraints

2014 ◽  
Vol 2014 ◽  
pp. 1-11 ◽  
Author(s):  
Xiaojian Yu ◽  
Siyu Xie ◽  
Weijun Xu
Keyword(s):  
Optimal Portfolio ◽  
Risky Asset ◽  
Risky Assets ◽  
Portfolio Strategy ◽  
Comparison Research ◽  
Practical Strategy ◽  
Drawdown Constraint ◽  
Novel Strategy ◽  
The Given ◽  
Maximum Drawdown

This paper deals with the problem of optimal portfolio strategy under the constraints of rolling economic maximum drawdown. A more practical strategy is developed by using rolling Sharpe ratio in computing the allocation proportion in contrast to existing models. Besides, another novel strategy named “REDP strategy” is further proposed, which replaces the rolling economic drawdown of the portfolio with the rolling economic drawdown of the risky asset. The simulation tests prove thatREDP strategycan ensure the portfolio to satisfy the drawdown constraint and outperforms other strategies significantly. An empirical comparison research on the performances of different strategies is carried out by using the 23-year monthly data of SPTR, DJUBS, and 3-month T-bill. The investment cases of single risky asset and two risky assets are both studied in this paper. Empirical results indicate that theREDP strategysuccessfully controls the maximum drawdown within the given limit and performs best in both return and risk.

scholarly journals Portfolio Strategy for an Investor with Logarithm Utility and Stochastic Interest Rate under Constant Elasticity of Variance Model

2020 ◽  
pp. 186-196
Author(s):  
Edikan E. Akpanibah ◽  
Udeme Ini
Keyword(s):  
Interest Rate ◽  
Optimal Portfolio ◽  
Risky Asset ◽  
Stochastic Interest Rate ◽  
Cev Model ◽  
Constant Elasticity ◽  
Constant Elasticity Of Variance ◽  
Portfolio Strategy ◽  
Expansion Technique ◽  
Stochastic Interest

This paper is aim at maximizing the expected utility of an investor’s terminal wealth; to achieve this, we study the optimal portfolio strategy for an investor with logarithm utility function under constant elasticity of variance (CEV) model in the presence of stochastic interest rate. A portfolio comprising of one risk free asset and one risky asset is considered where the risk free interest rate follows the Cox- Ingersoll-Ross (CIR) model and the risky asset is modelled by CEV. Using power transformation, change of Variable and asymptotic expansion technique, an explicit solution of the optimal portfolio strategy and the Value function is obtained. Furthermore, numerical simulations are presented to study the effect of some parameters on the optimal portfolio strategy under stochastic interest rate.

MULTI-ASSET PORTFOLIO OPTIMIZATION WITH STOCHASTIC SHARPE RATIO UNDER DRAWDOWN CONSTRAINT

2020 ◽  
Vol 15 (01) ◽  
pp. 2080001
Author(s):  
SUBHOJIT BISWAS ◽  
SAIF JAWAID ◽  
DIGANTA MUKHERJEE
Keyword(s):  
Stochastic Volatility ◽  
Closed Form Solution ◽  
Fixed Time ◽  
Form Solution ◽  
Risk Tolerance ◽  
Finite Difference Schemes ◽  
Value Functions ◽  
Pairs Trading ◽  
Risky Assets ◽  
Drawdown Constraint

We consider an investor who seeks to maximize his expected utility of the portfolio, consisting of multiple risky assets and one risk-free asset, derived from the terminal wealth relative to the maximum wealth achieved over a fixed time horizon. This is achieved under a portfolio draw down constraint, in a market with local stochastic volatility. In empirical application, considering two risky assets, the assets have been identified with the help of pairs trading. In the absence of closed form solution of the value function and the optimal strategy, we obtain the approximates of these quantities using coefficient series expansion techniques and finite difference schemes. We utilize the risk tolerance factor function to ease our approximations of this value functions and the strategies. All the parameters were estimated from the triplets and used to illustrate and compare the stochastic volatility with the constant volatility situation, and how an investor can deploy different portfolio plans.

A novel and practical strategy for the precise chamferless robotic peg hole insertion

Robotica ◽  
1995 ◽  
Vol 13 (1) ◽  
pp. 29-35 ◽  
Author(s):  
H. Qiao ◽  
B. S. Dalay ◽  
R. M. Parkin
Keyword(s):  
Surface Defects ◽  
Initial Conditions ◽  
Force Sensor ◽  
Geometric Uncertainties ◽  
Practical Strategy ◽  
Severe Difficulty ◽  
Novel Strategy ◽  
Lateral Error ◽  
Assembly Operations ◽  
The Relationship

SummaryThe influence of the angle between the axes of the peg and hole (angular error) and the contact surface defects on the measurement of deviation (lateral error) have been carefully analysed. It has been shown that they would influence the measurement of the magnitude of deviation and even its direction. This phenomenon causes severe difficulty in the assembly operations. A novel strategy for the high-precision chamferless peg hold insertion with a wrist force sensor is presented. This strategy is constructed: (1) to obtain the relationship between the peg and hole from the force sensor signal when an angle between the axes of the peg and hole exists and defects of the contact surfaces are present, (2) to reduce the angular and lateral errors, (3) to achieve the precise chamferless robotic peg hole insertion. In this paper, the insertion can be obtained with a reasonably large range of initial conditions. The principle is to move and rotate the peg from an area having many geometric uncertainties to a new area, where the deviation of the peg and hole can be obtained.

scholarly journals The Effect of Exit Strategy on Optimal Portfolio Selection with Birandom Returns

2013 ◽  
Vol 2013 ◽  
pp. 1-6 ◽  
Author(s):  
Guohua Cao ◽  
Dan Shan
Keyword(s):  
Portfolio Selection ◽  
Stock Return ◽  
Optimal Portfolio ◽  
Exit Strategy ◽  
Hybrid Intelligent Algorithm ◽  
Optimal Portfolio Selection ◽  
Stop Loss ◽  
The Given ◽  
Safety First ◽  
Better Than

The aims of this paper are to use a birandom variable to denote the stock return selected by some recurring technical patterns and to study the effect of exit strategy on optimal portfolio selection with birandom returns. Firstly, we propose a new method to estimate the stock return and use birandom distribution to denote the final stock return which can reflect the features of technical patterns and investors' heterogeneity simultaneously; secondly, we build a birandom safety-first model and design a hybrid intelligent algorithm to help investors make decisions; finally, we innovatively study the effect of exit strategy on the given birandom safety-first model. The results indicate that (1) the exit strategy affects the proportion of portfolio, (2) the performance of taking the exit strategy is better than when the exit strategy is not taken, if the stop-loss point and the stop-profit point are appropriately set, and (3) the investor using the exit strategy become conservative.

Economic Benefits of Derivatives for Long Term Investments-Equity Linked Securities

2019 ◽  
Vol 27 (2) ◽  
pp. 211-252
Author(s):  
Byung Jin Kang
Keyword(s):  
Risk Aversion ◽  
Decision Rules ◽  
Economic Benefits ◽  
Optimal Portfolio ◽  
Investment Horizon ◽  
Risky Assets ◽  
Knock Out ◽  
Medium Level ◽  
Low Degrees

In this paper, we examined the economic benefits of derivatives in the aspect of investment assets. Our study differs from previous studies in that it analyzed the differences in the economic benefits of derivatives between for short term investors and for long term investors, and focused on the equity linked securities (ELS) rather than plain vanilla derivatives. We found the following results from the analysis over 1 to 20 years of investment horizons for four different types of equity linked securities, including ‘Auto-callable ELS’, ‘Knock-out ELS’, ‘Digital ELS’ and ‘Reverse Convertible ELS.’ First, equity linked securities contribute to improving the performance of the optimal portfolio for most investors, except for some investors who have extremely low degrees of risk aversion. Second, these economic benefits of equity linked securities are consistently observed regardless of investment horizon. Third, investment demand for equity linked securities is higher for investors with a medium-level of risk aversion rather than for aggressive or conservative investors. In addition, equity linked securities are mainly used as substitutes for risk-free bonds rather than risky assets (i.e., stocks). Finally, most of our results are still valid even when different market environments are assumed or alternative decision rules are used to derive investors’ optimal portfolio.

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