Cardinality-constrained risk parity portfolios

Anis, Hassan; Kwon, Roy H.

doi:10.1016/j.ejor.2021.12.045

Cited by 14 publications

(2 citation statements)

References 24 publications

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“…The core of risk management is risk measurement, and there is no risk management if the risk of financial assets cannot be accurately measured. The traditional approach assumes that the portfolio of financial assets obeys a multivariate normal distribution and a linear correlation coefficient portrays the correlation, but this is incompatible with the complex correlation between the actual financial assets and the characteristics of the spikes and tails of the distribution of each asset [6][7][8]. Therefore, there is a need to find more accurate and reasonable tools and methods to measure risk [9].…”

Section: Introductionmentioning

confidence: 99%

A study of asset portfolio risk control based on stochastic optimization

Bai,

Chen,

Liu

et al. 2023

Applied Mathematics and Nonlinear Sciences

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This paper analyzes the main methods of stochastic optimization algorithms to construct a stochastic optimization model. The focus is on the calculation method for risk minimization, combined with the SGD algorithm to guarantee the speed of sublinear convergence. The mean variance of the risk evaluation model is determined by constructing the objective function and constraints, and the investor’s risk is minimized based on calculating the minimum variance of the model. The asset portfolio risk evaluation model can accurately describe the risk of different industries, as demonstrated by the results. According to the correlation coefficient reality, the correlation between industry indices is relatively strong, where the correlation coefficient between raw materials and the optional consumption industry is 0.865, and the correlation coefficient between the optional consumption industry and the financial industry is 0.697.

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Section: Introductionmentioning

confidence: 99%

A study of asset portfolio risk control based on stochastic optimization

Bai,

Chen,

Liu

et al. 2023

Applied Mathematics and Nonlinear Sciences

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“…Cesarone and Tardella (2017) study the connection between risk parity portfolios with the variance as a measure of risk and the equal variance portfolio, a portfolio where the variances of each asset are equal. Recently, Bellini et al (2021) studied risk parity for expectile risk measures and Anis and Kwon (2022) considers risk parity with additional cardinality constraints.…”

Section: Introductionmentioning

confidence: 99%

Risk Budgeting Portfolios from Simulations

2022

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Nonconvex multi-period mean-variance portfolio optimization

Wu¹,

Xie²,

Zhang³

et al. 2023

Ann Oper Res

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In this paper, we address the problem of long-term investment by exploring optimal strategies for allocating wealth among a finite number of assets over multiple periods. Based on the classical Markowitz mean-variance philosophy, we develop a new portfolio optimization framework which can produce sparse portfolios. The sparsity of the portfolio at each and across periods is characterized by the possibly nonconvex penalties. For the constructed nonconvex and nonsmooth constrained model, we propose a generalized alternating direction method of multipliers and its global convergence to a stationary point can be guaranteed theoretically. Moreover, some numerical experiments are conducted on several datasets generated from practical applications to illustrate the effectiveness and advantage of the proposed model and solving method.

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Cardinality-constrained risk parity portfolios

Cited by 14 publications

References 24 publications

A study of asset portfolio risk control based on stochastic optimization

A study of asset portfolio risk control based on stochastic optimization

Risk Budgeting Portfolios from Simulations

Nonconvex multi-period mean-variance portfolio optimization

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