Examines financial risks' impact on EU-15 economic growth.
problem The impact of financial risks on economic growth in EU-15.
method Panel estimated generalized least squares method with additional control variables.
result Financial risks significantly impact economic growth in EU-15.
Enhanced Gordon growth model for valuing financial products.
problem Valuation of financial products with time-varying interest rates and dividends.
method Dynamic Gordon growth model with time-varying spot interest rate and dividends, risk-neutral valuation, locally risk-minimizing strategy.
result Pricing and hedging formulas for dividend-paying European options and equity-linked life insurance products.
Paper introduces new risk measures for Kelly criterion.
problem Aggressive Kelly criterion investment strategy.
method Unified approach to risk assessment in Kelly criterion.
result Two new measures for quantifying risk.
Optimizes stock portfolios to maximize growth while keeping risk in check.
problem Maximizing wealth growth under risk constraints.
method Online portfolio selection with CVaR constraints.
result Guaranteed asymptotic optimal solution with risk constraint fulfillment.
Investigates how growth and risk balance in populations, revealing a trade-off.
problem Balancing growth and risk in populations under uncertain environments.
method Revisits a common growth model over general graphs to uncover the trade-off between risks and returns.
result Optimal growth strategies often lead to risky positions, but geometry of space can alleviate this tension.
Study preferences over uncertain time payments, finds growth-optimality better than expected utility theory.
problem Understanding how people make decisions with uncertain timing of payments.
method Normative model of growth-optimality, revisiting experimental evidence on time lotteries.
result Growth-optimality better explains experimental data on time lotteries than expected discounted utility theory.
Kelly investing improved with options to reduce estimation risk.
problem Estimation risk in Kelly investing leads to suboptimal portfolios.
method Introduced European options into the Kelly framework in a binomial model.
result Constructed growth optimal portfolios robust to estimation risk.
Boundary-induced apparent risk aversion in non-ergodic growth models.
problem Risk aversion in multiplicative growth systems with absorbing boundaries.
method Exact lattice propagation and analysis of binary multiplicative processes.
result Optimal exposure is compressed near absorbing boundaries, mimicking risk aversion.
We investigate the ergodic problem of growth-rate maximization under a class of risk constraints in the context of incomplete, Itô-process models of financial markets with random ergodic coefficients. Including {\em value-at-risk} (VaR), {\em tail-value-at-risk} (TVaR), and {\em limited expected loss} (LEL), these cons…
Study optimal portfolio choice with risk control for log-returns.
problem Optimal portfolio choice with risk management in continuous-time markets.
method Characterized optimal terminal wealth using concave envelope, derived analytical expressions for optimal wealth and policy, found efficient frontier.
result Efficient frontier is concave curve connecting minimum-risk to growth-optimal portfolios, not a vertical line.
Boundary-induced risk aversion in non-ergodic growth models.
problem Tension between expected-utility curvature and observed risk-taking behavior.
method Study of a finite-horizon binary multiplicative process with absorbing boundaries.
result Boundary-induced compression of optimal exposure below the Kelly fraction, leading to apparent risk aversion.
Investment strategy using fractional Kelly portfolios for better growth expectations.
problem Understanding optimal growth strategies for investors with varying risk appetites.
method Developed a mathematical framework for fractional-Kelly portfolios, analyzing Sharpe ratios and log-returns.
result Fractional Kelly portfolios provide a simple distributional relationship between Sharpe ratio, fractional coefficient, and log-returns.
Study optimizes natural resource harvesting under model uncertainty using risk measures.
problem Optimal harvesting policy selection for natural resources under model uncertainty.
method Investigated using neoclassical growth model dynamics and convex risk measures, specifically Fréchet risk measures.
result Robust harvesting strategies quantifying operational and marginal risk under model uncertainty.
Unified framework for growth models with environmental risk and pollution-dependent disasters.
problem Analyzing how rare but catastrophic shocks interact with capital accumulation and pollution in stochastic growth models.
method General Poisson point process formulation leading to non-local HJB equations with closed-form solutions.
result Unified framework captures how environmental degradation amplifies macroeconomic vulnerability and strengthens incentives for abatement.
We propose a new class of mappings, called Dynamic Limit Growth Indices, that are designed to measure the long-run performance of a financial portfolio in discrete time setup. We study various important properties for this new class of measures, and in particular, we provide necessary and sufficient condition for a Dyn…
Study on price formation in financial markets with a single default event.
problem Equilibrium price formation in financial markets with a single default risk.
method Characterized optimal strategies using quadratic-growth BSDEs, derived market-clearing condition, and established mean-field BSDE solvability.
result Characterized equilibrium risk premium and its dependence on default risk factors.
We first estimate the average growth of a company's annual income and its variance by using both real company data and a numerical model which we already introduced a couple of years ago. Investment strategies expecting for income growth is evaluated based on the numerical model. Our numerical simulation suggests the p…
New methods estimate transport-growth pairs in unbalanced optimal transport.
problem Statistical guarantees for Monge-type estimation in unbalanced optimal transport remain limited.
method Developed two estimators for transport-growth pairs under different setups.
result Achieved minimax optimal rate for estimation of transport-growth pairs.
We consider the classic Kelly gambling problem with general distribution of outcomes, and an additional risk constraint that limits the probability of a drawdown of wealth to a given undesirable level. We develop a bound on the drawdown probability; using this bound instead of the original risk constraint yields a conv…
The Kelly Criterion is applied to prediction markets to analyze risk and return.
problem Mean beliefs in prediction markets often differ from actual prices.
method Logarithmic utility and Kullback-Leibler divergence are used to study risk and return adjustments.
result Misjudgment of bias and investment fraction affect portfolio growth rate.
Paper introduces benchmark-neutral pricing for long-term contracts.
problem High prices of long-term contracts under risk-neutral pricing.
method Uses growth optimal portfolio as numeraire and new pricing measure.
result Identifies minimal possible prices for contingent claims.
Network models assume unrealistic idiosyncratic risk, which can be mitigated by allowing for correlated shocks.
problem Network models assume idiosyncratic risk, which can be unrealistic and lead to incorrect predictions.
method Proposed a production-based asset pricing model to account for substitutability between trade partners and correlation in supply and demand shocks.
result Assets positively exposed to average propagation of upstream and downstream shocks earn lower average risk premia.
Introduces GA-P/E, a growth-adjusted stock valuation measure.
problem Evaluating stock value and predicting future returns.
method Computes a payback period adjusted for earnings growth, using a sorted portfolio methodology.
result Low GA-P/E stocks outperform high GA-P/E stocks in absolute and risk-adjusted returns.
Optimizes consumption under regime-switching economic states with risk-sensitive preferences.
problem Optimizing consumption in an economy with uncertain states and random shocks.
method Risk-sensitive optimization of consumption-utility with a Markov chain model of economic states and i.i.d. random shocks.
result Existence of unique optimal policy and value function in stationary policies.
The article presents a general discrete time dividend valuation model when the dividend growth rate is a general continuous variable. The main assumption is that the dividend growth rate follows a discrete time semi-Markov chain with measurable space. The paper furnishes sufficient conditions that assure finiteness of …
AI enhances bank credit risk management through deep learning and data analysis.
problem Inaccurate credit decisions and potential risks in bank credit risk management.
method Innovative application of AI technology, including deep learning and big data analysis.
result AI provides more accurate and comprehensive credit decision support, reducing risks and losses.
CV outperforms mean-variance for stock returns, minimizing risk and maximizing growth.
problem Traditional risk assessment methods underperform in stock market analysis.
method Derived new CV equation and used it to analyze stock performance.
result Stocks with low but positive CV grow exponentially, outperforming high-risk stocks.
The Kelly rule fails to maximize growth in a time-changed return setting.
problem Performance of the Kelly rule in a time-changed return process.
method Investigated the Kelly rule in a semi-martingale setting with a time change process.
result The Kelly rule does not maximize average growth rate in a non-normal log-return setting.
This paper proposes a continuous timing strategy for growth vs. defensive style allocation.
problem Dynamic allocation of growth and defensive ETF baskets using macro-market timing signals.
method Continuous smooth score combining multiple factors, mapped to G/D weights, smoothed with EWMA.
result Continuous style timing strategy outperforms static benchmarks in risk-adjusted returns.
SER tool predicts storage capacity risk with probabilistic accuracy.
problem Managing data storage growth to avoid financial losses.
method Stochastic Estimated Risk (SER) using Brownian motion with drift model.
result Probabilistic approach is more accurate for non-linear storage patterns.
Dynamic pricing model considers ambiguity in endowment growth rate.
problem Dynamic asset pricing under ambiguous endowment growth rate.
method α-maxmin expected utility model for ambiguity, intra-personal equilibrium strategies, market equilibrium.
result Asset prices reflect ambiguity in endowment growth rate.
A modular cash-overlay rule for allocating between a fixed growth-defensive risky sleeve and interest-bearing cash.
problem Drawdown control
method Continuous cash-overlay filters
result Earnings an 18.83% CAGR versus 16.62% for 100% R
This paper evaluates investment risks in LATAM AI startups using DCF method.
problem Unique challenges and risks faced by LATAM tech startups.
method Total Addressable Market (TAM), Serviceable Available Market (SAM), and Serviceable Obtainable Market (SOM) metrics; Discounted Cash Flow (DCF) method.
result Developed a ranking of emerging powers in Latin America for tech startup investment.
We discuss when and why custom multi-factor risk models are warranted and give source code for computing some risk factors. Pension/mutual funds do not require customization but standardization. However, using standardized risk models in quant trading with much shorter holding horizons is suboptimal: 1) longer horizon …
The paper analyzes liquidity in decentralized finance, deriving impact functions and de-pegging risks.
problem Understanding and quantifying market impact and de-pegging risk in decentralized finance.
method Derives market impact functions for optimal-growth liquidity providers, views Constant Product Market Maker as a Carnot engine, and links de-pegging risks to catastrophe bonds.
result New insights into liquidity models and de-pegging risks in decentralized finance.
GenAI offers financial benefits but requires risk management.
problem Managing risks in financial applications of AI.
method Balancing AI's potential with risk control strategies.
result Proper risk management is essential for AI growth in finance.
Optimizes portfolio growth rate for a behavioral investor considering terminal relative growth rate.
problem Optimizing a behavioral investor's portfolio growth rate under relative growth criterion.
method Martingale method, concavification, and quantile optimization techniques.
result Derives closed-form optimal growth rate and finds significant impact of benchmark growth rate.
Paper proposes new strategies for better portfolio estimation in long-term investments with unknown distributions.
problem Worse out-of-sample performance of estimated portfolios due to unknown future data distribution.
method Online learning framework, dynamic sequential portfolios, updating risk aversion coefficient.
result Dynamic strategies achieve asymptotically optimal utility, Sharpe ratio, and growth rate of true portfolios.
This survey reviews portfolio selection problem for long-term horizon. We consider two objectives: (i) maximize the probability for outperforming a target growth rate of wealth process (ii) minimize the probability of falling below a target growth rate. We study the asymptotic behavior of these criteria formulated as l…
For a stochastic factor model we maximize the long-term growth rate of robust expected power utility with parameter λ∈(0,1). Using duality methods the problem is reformulated as an infinite time horizon, risk-sensitive control problem. Our results characterize the optimal growth rate, an optimal long-term trading s…
Studying Binomial and Gaussian return dynamics in discrete time, we show how excess volatility can be traded to create growth. We test our results on real world data to confirm the observed model phenomena while also highlighting implicit risks.
A portfolio of different stocks and a risk-less security whose composition is dynamically maintained stable by trading shares at any time step leads to a growth of the capital with a nonrandom rate. This is the key for the theory of optimal-growth investment formulated by Kelly. In presence of transaction costs, the op…
In modern portfolio theory, the balancing of expected returns on investments against uncertainties in those returns is aided by the use of utility functions. The Kelly criterion offers another approach, rooted in information theory, that always implies logarithmic utility. The two approaches seem incompatible, too loos…
This paper describes an empirical study of shortfall optimization with Barra Extreme Risk. We compare minimum shortfall to minimum variance portfolios in the US, UK, and Japanese equity markets using Barra Style Factors (Value, Growth, Momentum, etc.). We show that minimizing shortfall generally improves performance ov…
We demonstrate by mathematical analysis and systematic computer simulations that redistribution can lead to sustainable growth in a society. The human capital dynamics of each agent is described by a stochastic multiplicative process which, in the long run, leads to the destruction of individual human capital and the e…
Modeling bank portfolio risk under climate transition impacts.
problem Evaluating risk measures for a bank's collateralized loans in a climate transition economy.
method Developed an end-to-end modeling framework using stochastic processes and dynamic macroeconomic variables.
result Derived expressions for risk measures as functions of climate transition parameters.
Survey of DRO, a robust optimization framework.
problem Risk-aversion and chance-constrained optimization challenges.
method Distributionally robust optimization (DRO) framework.
result DRO's growing importance in operations research and statistics.
Milken revolutionized finance with junk bonds, boosting private equity and tech growth.
problem Lack of financing options for risky but potentially profitable companies.
method Innovative use of junk bonds and leveraged buyouts (LBOs).
result Milken's financial strategies led to significant economic growth and the rise of tech companies.