Outperforming a Benchmark with $\alpha$-Bregman Wasserstein divergence

Silvana Pesenti (U Toronto)

Feb 09. 2026, 14:15 — 14:50

We consider the problem of active portfolio management, where an investor seeks the portfolio with maximal expected utility of the difference between the terminal wealth of their strategy and a proportion of the benchmark's, subject to a budget, and a deviation constraints from the benchmark portfolio.  As the investor aims at outperforming the benchmark, they choose a divergence that asymmetrically penalises gains and losses as well as penalises underperforming the benchmark more than outperforming it. This is achieved by the recently introduced $\alpha$-Bregman Wasserstein divergence, subsuming the Bregman Wasserstein and the popular Wasserstein divergence. We prove existence, uniqueness, and characterise of the optimal portfolio strategy and give explicit criteria when the divergence constraints and the budget constraints are binding and conclude with a numerical illustration.

Further Information
Venue:
ESI Boltzmann Lecture Hall
Associated Event:
Probabilistic Mass Transport - from Schrödinger to Stochastic Analysis (Workshop)
Organizer(s):
Beatrice Acciaio (ETH Zurich)
Julio Backhoff (U of Vienna)
Daniel Bartl (U of Vienna)
Mathias Beiglböck (U of Vienna)
Sigrid Källblad (KTH Stockholm)
Walter Schachermayer (U of Vienna)