Related papers: Stability of the utility maximization problem with…
Most decision theories, including expected utility theory, rank dependent utility theory and cumulative prospect theory, assume that investors are only interested in the distribution of returns and not in the states of the economy in which…
We study regularity properties of the dynamic value functions of primal and dual problems of optimal investing for utility functions defined on the whole real line. Relations between decomposition terms of value processes of primal and dual…
We study expected utility maximization problem with constant relative risk aversion utility function in a complete market under the reinforcement learning framework. To induce exploration, we introduce the Tsallis entropy regularizer, which…
This paper investigates Merton's portfolio problem in a rough stochastic environment described by Volterra Heston model. The model has a non-Markovian and non-semimartingale structure. By considering an auxiliary random process, we solve…
This article studies quadratic semimartingale BSDEs arising in power utility maximization when the market price of risk is of BMO type. In a Brownian setting we provide a necessary and sufficient condition for the existence of a solution…
Benchmarks in the utility function have various interpretations, including performance guarantees and risk constraints in fund contracts and reference levels in cumulative prospect theory. In most literature, benchmarks are a deterministic…
We consider an optimal consumption/investment problem to maximize expected utility from consumption. In this market model, the investor is allowed to choose a portfolio which consists of one bond, one liquid risky asset (no transaction…
We investigate optimal consumption and investment problems for a Black-Scholes market under uniform restrictions on Value-at-Risk and Expected Shortfall. We formulate various utility maximization problems, which can be solved explicitly. We…
Optimization under uncertainty and risk is indispensable in many practical situations. Our paper addresses stability of optimization problems using composite risk functionals which are subjected to measure perturbations. Our main focus is…
This paper formulates a model of utility for a continuous time framework that captures the decision-maker's concern with ambiguity about both volatility and drift. Corresponding extensions of some basic results in asset pricing theory are…
We investigate optimal consumption problems for a Black-Scholes market under uniform restrictions on Value-at-Risk and Expected Shortfall for logarithmic utility functions. We find the solutions in terms of a dynamic strategy in explicit…
In this paper, we study the classical problem of maximization of the sum of the utility of the terminal wealth and the utility of the consumption, in a case where a sudden jump in the risk-free interest rate creates incompleteness. The…
In an arbitrage-free simple market, we demonstrate that for a class of state-dependent exponential utilities, there exists a unique prediction of the random risk aversion that ensures the consistency of optimal strategies across any time…
The paper studies the robust maximization of utility of terminal wealth in the diffusion financial market model. The underlying model consists with risky tradable asset, whose price is described by diffusion process with misspecified trend…
We consider a financial market where stocks are available for dynamic trading, and European and American options are available for static trading (semi-static trading strategies). We assume that the American options are infinitely…
This paper considers utility indifference valuation of derivatives under model uncertainty and trading constraints, where the utility is formulated as an additive stochastic differential utility of both intertemporal consumption and…
As operators acting on the undetermined final settlement of a derivative security, expectation is linear but price is non-linear. When the market of underlying securities is incomplete, non-linearity emerges from the bid-offer around the…
Recent literature in the last Maximum Entropy workshop introduced an analogy between cumulative probability distributions and normalized utility functions. Based on this analogy, a utility density function can de defined as the derivative…
We study a problem of optimal investment/consumption over an infinite horizon in a market consisting of two possibly correlated assets: one liquid and one illiquid. The liquid asset is observed and can be traded continuously, while the…
We consider an arbitrage-free, discrete time and frictionless market. We prove that an investor maximising the expected utility of her terminal wealth can always find an optimal investment strategy provided that her dissatisfaction of…