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Portfolio Selection with Irregular Time Grids: an example using an ICA-COGARCH(1, 1) approach.

Francesco BianchiLorenzo MercuriEdit Rroji
Published in: Financial markets and portfolio management (2021)
In this paper we consider a portfolio selection problem defined for irregularly spaced observations. We use the Independent Component Analysis for the identification of the dependence structure and continuous-time GARCH models for the marginals. We discuss both estimation and simulation of market prices in a context where the time grid of price quotations differs across assets. We present an empirical analysis of the proposed approach using two high-frequency datasets that provides better out-of-sample results than competing portfolio strategies except for the case of severe market conditions with frequent rebalancements.
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