A locally-built, LLM-digested index of recent arXiv papers in quant finance, geometry/topology, and statistical ML — keyword search served straight from SQLite on this machine.
Investigates how diversification preferences relate to risk attitudes.
Risk diversification is one of the dominant concerns for portfolio managers. Various portfolio constructions have been proposed to minimize the risk of the portfolio under some constrains including expected returns. We propose a portfolio construction method that incorporates the complex valued principal component anal…
A new diversification measure DQ derived from risk measures addresses limitations of existing indices.
Diversification increases systemic risk, contrary to belief.
The paper proposes a new approach to portfolio selection that maximizes diversification and return.
Risk-only investment strategies have been growing in popularity as traditional in- vestment strategies have fallen short of return targets over the last decade. However, risk-based investors should be aware of four things. First, theoretical considerations and empirical studies show that apparently dictinct risk-based …
A new portfolio method using quantum mechanics improves risk diversification.
This paper improves the Diversification Quotient (DQ) for better risk management.
Investigates diversification quotient based on VaR and ES for portfolio models.
New study shows diversification can increase risk for heavy-tailed losses.
The quantification of diversification benefits due to risk aggregation plays a prominent role in the (regulatory) capital management of large firms within the financial industry. However, the complexity of today's risk landscape makes a quantifiable reduction of risk concentration a challenging task. In the present pap…
We consider the problem of risk diversification of -stable heavy tailed risks. We study the behaviour of the aggregated Value-at-Risk, with particular reference to the impact of different tail dependence structures on the limits to diversification. We confirm the large evidence of sub-additivity violations, particul…
Diversification improves profits for heavy-tailed investments.
Paper introduces lexical ratio to measure portfolio diversification.
Diversification represents the idea of choosing variety over uniformity. Within the theory of choice, desirability of diversification is axiomatized as preference for a convex combination of choices that are equivalently ranked. This corresponds to the notion of risk aversion when one assumes the von-Neumann-Morgenster…
Investing in cryptocurrencies can improve portfolio risk-return profile, especially with diversification strategies.
Optimizes diversification in catastrophe risk pooling using asymptotic analysis.
Global catastrophe risk pools increase financial resilience by diversifying risk and including more countries.
New DQ based on expectiles improves portfolio diversification.
New risk measures improve portfolio diversification and stability.
Defines diversification as a binary relationship between financial portfolios.
We investigate a multi-factor extension of the asymptotic single risk factor (ASRF) model that underlies the capital charges of the "Basel II Accord". In this extended model, it is still possible to derive closed-form solutions for the risk contributions to Value-at-Risk and Expected Shortfall. As an application of the…
The conventional wisdom of mean-variance (MV) portfolio theory asserts that the nature of the relationship between risk and diversification is a decreasing asymptotic function, with the asymptote approximating the level of portfolio systematic risk or undiversifiable risk. This literature assumes that investors hold an…
Excessive leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be considered independent. Based on the structural framework by Merton (1974), we discuss …
New methods show sparse portfolios offer no advantage over mean-variance in diversification.
Geographic diversification is fundamental to risk mitigation among investors and insurers of housing, mortgages, and mortgage-related derivatives. To characterize diversification potential, we provide estimates of integration, spatial correlation, and contagion among US metropolitan housing markets. Results reveal a hi…
Network theory proved recently to be useful in the quantification of many properties of financial systems. The analysis of the structure of investment portfolios is a major application since their eventual correlation and overlap impact the actual risk diversification by individual investors. We investigate the biparti…
The so-called risk diversification principle is analyzed, showing that its convenience depends on individual characteristics of the risks involved and the dependence relationship among them. ----- Se analiza el principio de diversificación de riesgos y se demuestra que no siempre resulta mejor que no diversificar, pues…
The study revisits portfolio diversification by relaxing assumptions for skewed, multi-regime, and leptokurtic asset returns.
The paper develops diverse risk models for US stock portfolios.
Risk diversification is the basis of insurance and investment. It is thus crucial to study the effects that could limit it. One of them is the existence of systemic risk that affects all the policies at the same time. We introduce here a probabilistic approach to examine the consequences of its presence on the risk loa…
Portfolio diversification and active risk management are essential parts of financial analysis which became even more crucial (and questioned) during and after the years of the Global Financial Crisis. We propose a novel approach to portfolio diversification using the information of searched items on Google Trends. The…
This study tackles basis risk in weather parametric insurance using Monte Carlo simulations.
Agents prefer non-diversification in markets with extreme losses.
A widely applied diversification paradigm is the naive diversification choice heuristic. It stipulates that an economic agent allocates equal decision weights to given choice alternatives independent of their individual characteristics. This article provides mathematically and economically sound choice theoretic founda…
A new framework for portfolio diversification is introduced which goes beyond the classical mean-variance approach and portfolio allocation strategies such as risk parity. It is based on a novel concept called portfolio dimensionality that connects diversification to the non-Gaussianity of portfolio returns and can typ…
Optimizes portfolios by identifying causal drivers of diversification.
Paper introduces Arte-Blue Chip Index for diversifying portfolios with art investments.
Cryptocurrency markets exhibit violent, synchronised drawdowns, challenging diversification claims.
New formula for portfolio risk management using conditional PDEs.
Shaped by structural forces of change, banking in emerging markets has recently experienced a decline in its traditional activities, leading banks to diversify into new business strategies. This paper examines whether the observed shift into non-interest based activities improves financial performance. Using a sample o…
A new portfolio method uses NMF for risk budgeting, outperforming classical methods.
Develops a new method for risk diversification using dynamic risk measures.
We present an extension of the Johansen-Ledoit-Sornette (JLS) model to include an additional pricing factor called the "Zipf factor", which describes the diversification risk of the stock market portfolio. Keeping all the dynamical characteristics of a bubble described in the JLS model, the new model provides additiona…
This paper explores portfolio management strategies to maximize alpha and minimize beta.
Paper models cloud outages for cyber insurance stress-testing.
We construct a binomial model for a guaranteed minimum withdrawal benefit (GMWB) rider to a variable annuity (VA) under optimal policyholder behaviour. The binomial model results in explicitly formulated perfect hedging strategies funded using only periodic fee income. We consider the separate perspectives of the insur…
We model the influence of sharing large exogeneous losses to the reinsurance market by a bipartite graph. Using Pareto-tailed claims and multivariate regular variation we obtain asymptotic results for the Value-at-Risk and the Conditional Tail Expectation. We show that the dependence on the network structure plays a fu…