Risk minimization through portfolio replication
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Abstract: We use a replica approach to deal with portfolio optimization problems. A given risk measure is minimized using empirical estimates of asset values correlations. We study the phase transition which happens when the time series is too short with respect to the size of the portfolio. We also study the noise sensitivity of portfolio allocation when this transition is approached. We consider explicitely the cases where the absolute deviation and the conditional value-at-risk are chosen as a risk measure. We show how the replica method can study a wide range of risk measures, and deal with various types of time series correlations, including realistic ones with volatility clustering.
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Cites work
- scientific article; zbMATH DE number 1273988 (Why is no real title available?)
- scientific article; zbMATH DE number 274379 (Why is no real title available?)
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Cited in
(20)- Validation of the replica trick for simple models
- A generalized error distribution copula-based method for portfolios risk assessment
- A new spin on optimal portfolios and ecological equilibria
- Risk minimization in multi-factor portfolios: what is the best strategy?
- Macroscopic relationship in primal-dual portfolio optimization problem
- Portfolio replication: its forward-dual decomposition
- Bias-variance trade-off in portfolio optimization under expected shortfall with $ \newcommand{\e}{{\rm e}} {\ell_2}$ regularization
- Analysis of overfitting in the regularized Cox model
- Divergent estimation error in portfolio optimization and in linear regression
- Cluster analysis for portfolio optimization
- Minimal investment risk of a portfolio optimization problem with budget and investment concentration constraints
- Portfolio optimization under expected shortfall: contour maps of estimation error
- Tracking a rainfall index constrained by conditional value-at-risk
- Regularizing portfolio optimization
- On the feasibility of portfolio optimization under expected shortfall
- Power mapping with dynamical adjustment for improved portfolio optimization
- Analytic solution to variance optimization with no short positions
- Maximizing and minimizing investment concentration with constraints of budget and investment risk
- Replica approach to mean-variance portfolio optimization
- Utilizing risk minimization for portfolio management
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