Model-free portfolio theory and its functional master formula
From MaRDI portal
Publication:4553804
DOI10.1137/16M1079828zbMATH Open1416.91363OpenAlexW2963876714WikidataQ129212974 ScholiaQ129212974MaRDI QIDQ4553804FDOQ4553804
Abstract: We use pathwise It^o calculus to prove two strictly pathwise versions of the master formula in Fernholz' stochastic portfolio theory. Our first version is set within the framework of F"ollmer's pathwise It^o calculus and works for portfolios generated from functions that may depend on the current states of the market portfolio and an additional path of finite variation. The second version is formulated within the functional pathwise It^o calculus of Dupire (2009) and Cont & Fourni'e (2010) and allows for portfolio-generating functionals that may depend additionally on the entire path of the market portfolio. Our results are illustrated by several examples and shown to work on empirical market data.
Recommendations
- scientific article; zbMATH DE number 1746020
- Generalizations of functionally generated portfolios with applications to statistical arbitrage
- Trading strategies generated pathwise by functions of market weights
- Functional portfolio optimization in stochastic portfolio theory
- A general theorem for portfolio generating functions
Cites Work
- scientific article; zbMATH DE number 3721834 (Why is no real title available?)
- scientific article; zbMATH DE number 3789618 (Why is no real title available?)
- scientific article; zbMATH DE number 1944705 (Why is no real title available?)
- scientific article; zbMATH DE number 1746020 (Why is no real title available?)
- Arbitrage bounds for prices of weighted variance swaps
- Change of variable formulas for non-anticipative functionals on path space
- Constructing functions with prescribed pathwise quadratic variation
- Diversity and relative arbitrage in equity markets
- Diversity-weighted portfolios with negative parameter
- Dynamic spanning without probabilities
- Functional Itō calculus and stochastic integral representation of martingales
- Generalizations of functionally generated portfolios with applications to statistical arbitrage
- Introduction to stochastic calculus for finance. A new didactic approach.
- Model-free CPPI
- On a class of generalized Takagi functions with linear pathwise quadratic variation
- On the diversity of equity markets
- Optimization of relative arbitrage
- Pathwise integration with respect to paths of finite quadratic variation
- Pathwise no-arbitrage in a class of delta hedging strategies
- Relative arbitrage in volatility-stabilized markets
- Robust hedging of double touch barrier options
- Robustness of Delta Hedging for Path-Dependent Options in Local Volatility Models
- Stochastic Portfolio Theory: an Overview
- The geometry of relative arbitrage
- The numéraire portfolio in semimartingale financial models
- Trading strategies generated by Lyapunov functions
Cited In (15)
- Model‐free portfolio theory: A rough path approach
- Beating the market? A mathematical puzzle for market efficiency
- On the \(p\)th variation of a class of fractal functions
- Time-inconsistency with rough volatility
- Trading strategies generated pathwise by functions of market weights
- Leakage of rank-dependent functionally generated trading strategies
- Robust control in a rough environment
- Trading strategies generated by Lyapunov functions
- A càdlàg rough path foundation for robust finance
- Quantifying dimensional change in stochastic portfolio theory
- Itô-Föllmer calculus in Banach spaces. I: The Itô formula
- Pathwise no-arbitrage in a class of delta hedging strategies
- Market-to-book ratio in stochastic portfolio theory
- The Impact of Proportional Transaction Costs on Systematically Generated Portfolios
- Generalised Lyapunov Functions and Functionally Generated Trading Strategies
This page was built for publication: Model-free portfolio theory and its functional master formula
Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q4553804)
