We consider the problem of measuring risk of a portfolio com- prising loans, bonds, and financial instruments, which is caused by possible default of its obligors. Specifically, we are interested in esti- mating probability that a portfolio incurs large loss over a fixed time horizon. One crucial concern of such problem is how to measure … Read more
Implied volatility expansions allow calibration of sophisticated volatility models. They provide an accurate fit and parametrization of implied volatility surfaces that is consistent with empirical observations. Fine-grained higher order expansions offer a better fit but pose the challenge of finding a robust, stable and computationally tractable calibration procedure due to a large number of market … Read more
In this paper we establish conditions under which uniqueness of market equilibrium is obtained in a setup where prior to trading of electricity, transmission capacities between different market regions are fixed. In our setup, firms facing fluctuating demand decide on the size and location of production facilities. They make production decisions constrained by the invested … Read more
When analyzing the relative performance of mutual funds, current data envelopment analysis (DEA) models with diversification only consider risks and returns over the entire investment process, which ignore the performance change in consecutive periods. This paper introduces a novel multi-period network DEA approach with diversification and the directional distance function. The new approach decomposes the … Read more
For reducing costs of market frictions, investors need to build a small-scale portfolio by solving a cardinality constrained portfolio selection problem which is NP-hard in general and not easy to be solved eciently for a large-scale problem. In this paper, we propose a penalty proximal alternat- ing linearized minimization method for the large-scale problems in … Read more
We propose an equilibrium model that allows to analyze the long-run impact of the regulatory environment on transmission line expansion by the regulator and investment in generation capacity by private firms in liberalized electricity markets. The model incorporates investment decisions of the transmission operator and private firms in expectation of an energy-only market and cost-based … Read more
The traditional Markowitz MVO approach is based on a single-period model. Single period models do not utilize any data or decisions beyond the rebalancing time horizon with the result that their policies are {\em myopic} in nature. For long-term investors, multi-period optimization offers the opportunity to make {\em wait-and-see} policy decisions by including approximate forecasts … Read more
In this paper we mainly focus on optimization of sums of squares of quadratic functions, which we refer to as second-order least-squares problems, subject to convex constraints. Our motivation arises from applications in risk parity portfolio selection. We generalize the setting further by considering a class of nonlinear, non convex functions which admit a (non … Read more
In traditional thinking, an arbitrageur will trade immediately once an arbitrage opportunity appears. Is this the best strategy for the arbitrageur or it is even better to wait for the best time to trade so as to achieve the maximum pro fit? To answer this question, this paper studies the optimal trading strategies of an arbitrageur … Read more
The article describes approximation technique for solving multiobjective stochastic optimization problems. As a generalized model of a stochastic system to be optimized a vector “input — random output” system is used. Random outputs are converted into a vector of deterministic performance/risk indicators. The problem is to find those inputs that correspond to Pareto-optimal values of … Read more