Related papers: Behavioral Portfolio Selection in Continuous Time
Modeling the purposeful behavior of imperfect agents from a small number of observations is a challenging task. When restricted to the single-agent decision-theoretic setting, inverse optimal control techniques assume that observed behavior…
We develop a method for computing policies in Markov decision processes with risk-sensitive measures subject to temporal logic constraints. Specifically, we use a particular risk-sensitive measure from cumulative prospect theory, which has…
This paper studies the continuous-time pre-commitment KMM problem proposed by Klibanoff, Marinacci and Mukerji (2005) in incomplete financial markets, which concerns with the portfolio selection under smooth ambiguity. The decision maker…
The purpose of this article is to introduce, analyze and compare two performance participation methods based on a portfolio consisting of two risky assets: Option-Based Performance Participation (OBPP) and Constant Proportion Performance…
This is a follow up of our previous paper - Trybu{\l}a and Zawisza \cite{TryZaw}, where we considered a modification of a monotone mean-variance functional in continuous time in stochastic factor model. In this article we address the…
When it comes to structural estimation of risk preferences from data on choices, random utility models have long been one of the standard research tools in economics. A recent literature has challenged these models, pointing out some…
We consider a security game in a setting consisting of two players (an attacker and a defender), each with a given budget to allocate towards attack and defense, respectively, of a set of nodes. Each node has a certain value to the attacker…
We consider a two-person trading game in continuous time whereby each player chooses a constant rebalancing rule $b$ that he must adhere to over $[0,t]$. If $V_t(b)$ denotes the final wealth of the rebalancing rule $b$, then Player 1 (the…
In this paper, we present an extended exploratory continuous-time mean-variance framework for portfolio management. Our strategy involves a new clustering method based on simulated annealing, which allows for more practical asset selection.…
Assuming that agents' preferences satisfy first-order stochastic dominance, we show how the Expected Utility paradigm can rationalize all optimal investment choices: the optimal investment strategy in any behavioral law-invariant…
We study the dynamic investment decisions of investors who prioritise specific quantiles of outcomes over their expected values. Downside-focused agents targeting low quantiles reduce risk in states with high variance, while those with a…
We study an optimal investment/consumption problem in a model capturing market and credit risk dependencies. Stochastic factors drive both the default intensity and the volatility of the stocks in the portfolio. We use the martingale…
This paper considers the optimal portfolio selection problem in a dynamic multi-period stochastic framework with regime switching. The risk preferences are of exponential (CARA) type with an absolute coefficient of risk aversion which…
The Random Utility Maximization model is by far the most adopted framework to estimate consumer choice behavior. However, behavioral economics has provided strong empirical evidence of irrational choice behavior, such as halo effects, that…
In this article we solve the problem of maximizing the expected utility of future consumption and terminal wealth to determine the optimal pension or life-cycle fund strategy for a cohort of pension fund investors. The setup is strongly…
This paper addresses the continuous-time portfolio selection problem under generalized disappointment aversion (GDA). The implicit definition of the certainty equivalent within GDA preferences introduces time inconsistency to this problem.…
We study a continuous-time portfolio optimization problem under an explicit constraint on the Deviation Conditional Value-at-Risk (DCVaR), defined as the difference between the CVaR and the expected terminal wealth. While the mean-CVaR…
A drawdown constraint forces the current wealth to remain above a given function of its maximum to date. We consider the portfolio optimisation problem of maximising the long-term growth rate of the expected utility of wealth subject to a…
We investigate a continuous-time investment-consumption problem with model uncertainty in a general diffusion-based market with random model coefficients. We assume that a power utility investor is ambiguity-averse, with the preference to…
We consider market players with tail-risk-seeking behaviour as exemplified by the S-shaped utility introduced by Kahneman and Tversky. We argue that risk measures such as value at risk (VaR) and expected shortfall (ES) are ineffective in…