Risk-Constrained Kelly Portfolios Under Alpha-Stable Laws

Kód výsledku v IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216208%3A11320%2F20%3A10423252" target="_blank" >RIV/00216208:11320/20:10423252 - isvavai.cz</a>

Výsledek na webu

<a href="https://verso.is.cuni.cz/pub/verso.fpl?fname=obd_publikace_handle&handle=4.7Z8HKezK" target="_blank" >https://verso.is.cuni.cz/pub/verso.fpl?fname=obd_publikace_handle&handle=4.7Z8HKezK</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.1007/s10614-019-09913-y" target="_blank" >10.1007/s10614-019-09913-y</a>

Jazyk výsledku

angličtina

Název v původním jazyce

Risk-Constrained Kelly Portfolios Under Alpha-Stable Laws

Popis výsledku v původním jazyce

This paper provides a detailed framework for modeling portfolios, achieving the highest growth rate under risk constraints such as value at risk (VaR) and expected shortfall (ES) in the presence of alpha-stable laws. Although the maximization of the expected logarithm of wealth induces outperforming any other significantly different strategy, the Kelly criterion implies larger bets than a risk-averse investor would accept. Restricting the Kelly optimization by spectral risk measures, the authors provide a generalized mapping for different measures of growth and risk. Analyzing over 30 years of S&amp;P 500 returns for different sampling frequencies, the authors find evidence for leptokurtic behavior for all respective sampling frequencies. Given that lower sampling frequencies imply a smaller number of data points, this paper argues in favor of alpha-stable laws and its scaling behavior to model financial market returns for a given horizon in an i.i.d. world. Instead of simulating from the class of elliptically alpha-stable distributions, a semiparametric scaling approximation, based on hourly NASDAQ data, is proposed. Our paper also uncovers that including long put options into the portfolio optimization, improves portfolio growth for a given level of VaR or ES, leading to a new Kelly portfolio providing the highest geometric mean.

Název v anglickém jazyce

Risk-Constrained Kelly Portfolios Under Alpha-Stable Laws

Popis výsledku anglicky

This paper provides a detailed framework for modeling portfolios, achieving the highest growth rate under risk constraints such as value at risk (VaR) and expected shortfall (ES) in the presence of alpha-stable laws. Although the maximization of the expected logarithm of wealth induces outperforming any other significantly different strategy, the Kelly criterion implies larger bets than a risk-averse investor would accept. Restricting the Kelly optimization by spectral risk measures, the authors provide a generalized mapping for different measures of growth and risk. Analyzing over 30 years of S&amp;P 500 returns for different sampling frequencies, the authors find evidence for leptokurtic behavior for all respective sampling frequencies. Given that lower sampling frequencies imply a smaller number of data points, this paper argues in favor of alpha-stable laws and its scaling behavior to model financial market returns for a given horizon in an i.i.d. world. Instead of simulating from the class of elliptically alpha-stable distributions, a semiparametric scaling approximation, based on hourly NASDAQ data, is proposed. Our paper also uncovers that including long put options into the portfolio optimization, improves portfolio growth for a given level of VaR or ES, leading to a new Kelly portfolio providing the highest geometric mean.

Druh

J_imp - Článek v periodiku v databázi Web of Science

CEP obor

—

OECD FORD obor

10103 - Statistics and probability

Projekt

<a href="/cs/project/GX19-28231X" target="_blank" >GX19-28231X: Dynamické modely pro digitální finance</a><br>

Návaznosti

P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)

Rok uplatnění

2020

Kód důvěrnosti údajů

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Název periodika

Computational Economics

ISSN

0927-7099

e-ISSN

—

Svazek periodika

55

Číslo periodika v rámci svazku

3

Stát vydavatele periodika

NL - Nizozemsko

Počet stran výsledku

26

Strana od-do

801-826

Kód UT WoS článku

000519585100003

EID výsledku v databázi Scopus

2-s2.0-85071274681