We are very happy to invite you to the second ZQFA Meetup this year. It is our great pleasure to announce our guest speaker, Dr. Patrick Matei Lucescu. In this meetup, our guest will guide us through his recent research.
Dr. Patrick Matei Lucescu
Topic: “Regularized Multi-Currency Expected Shortfall Portfolios”
Abstract: This paper introduces a regularized optimization framework for multi-currency asset allocation under expected shortfall. We consider two optimization approaches: the industry-standard currency overlay, which separates asset allocation and currency hedging into sequential steps, and a joint optimization framework that integrates both decisions simultaneously. To address the known instability of expected shortfall minimization, we introduce regularization techniques that promote sparsity and shrinkage, improving numerical stability and out-of-sample performance. The models are evaluated empirically through a backtesting framework that incorporates transaction costs in both assets and currencies. The results show that both approaches consistently deliver lower portfolio risk and higher risk-adjusted returns compared to unregularized and naive benchmarks. Furthermore, the joint optimization outperforms in a smaller asset universe by more effectively capturing dependencies between asset and currency exposures, while the overlay approach is more effective in a larger universe due to its dimensionality reduction.
The event will be hosted at University of Zurich Zentrum, room KOL-G-217 and will be followed-up by some beers at bQm.
Looking forward to seeing you at the event!
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- Antonello Cirulli
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