Related papers: Behavioral Portfolio Selection in Continuous Time
The article's aim is to provide a solution to the equity premium puzzle with a derived model. The derived model which depends on Consumption Capital Asset Pricing Model gives a solution to the puzzle with the values of coefficient of…
We consider a prospect theoretic version of the classical Q-learning algorithm for discounted reward Markov decision processes, wherein the controller perceives a distorted and noisy future reward, modeled by a nonlinearity that accentuates…
We propose a novel portfolio selection approach that manages to ease some of the problems that characterise standard expected utility maximisation. The optimal portfolio is no longer defined as the extremum of a suitably chosen utility…
How to allocate limited resources to projects that will yield the greatest long-term benefits is a problem that often arises in decision-making under uncertainty. For example, organizations may need to evaluate and select innovation…
In this paper, we consider the portfolio optimization problem in a financial market under a general utility function. Empirical results suggest that if a significant market fluctuation occurs, invested wealth tends to have a notable change…
Classical portfolio models degrade under structural breaks, whereas flexible machine-learning allocation methods often lack arbitrage consistency and interpretability. We propose Causal PDE-Control Models (CPCMs), a framework that…
In this paper two portfolio choice models are studied: a purely possibilistic model, in which the return of a risky asset is a fuzzy number, and a mixed model in which a probabilistic background risk is added. For the two models an…
This paper develops the first closed-form optimal portfolio allocation formula for a spot asset whose variance follows a GARCH(1,1) process. We consider an investor with constant relative risk aversion (CRRA) utility who wants to maximize…
Classical finance models are based on the premise that investors act rationally and utilize all available information when making portfolio decisions. However, these models often fail to capture the anomalies observed in intertemporal…
This paper studies the properties of the optimal portfolio-consumption strategies in a {finite horizon} robust utility maximization framework with different borrowing and lending rates. In particular, we allow for constraints on both…
This paper considers portfolio construction in a dynamic setting. We specify a loss function comprised of utility and complexity components with an unknown tradeoff parameter. We develop a novel regret-based criterion for selecting the…
We propose a general family of piecewise hyperbolic absolute risk aversion (PHARA) utilities, including many classic and non-standard utilities as examples. A typical application is the composition of a HARA preference and a piecewise…
Prospect theory is widely viewed as the best available descriptive model of how people evaluate risk in experimental settings. According to prospect theory, people are risk-averse with respect to gains and risk-seeking with respect to…
This paper considers the constrained portfolio optimization in a generalized life-cycle model. The individual with a stochastic income manages a portfolio consisting of stocks, a bond, and life insurance to maximize his or her consumption…
We study optimal portfolio choice models in markets with partial information about the stock's drift. We solve the single agent problem for general utilities using a new approach that yields regularity of the value function and closed form…
To investigate a time-consistent optimal strategy for the continuous time mean-variance model, we develop a new method to establish the Bellman principle. Based on this new method, we obtain a time-consistent dynamic optimal strategy that…
We study the problem of optimal portfolio selection under stochastic volatility within a continuous time reinforcement learning framework with portfolio constraints. Exploration is modeled through entropy-regularized relaxed controls, where…
Changes in market conditions present challenges for investors as they cause performance to deviate from the ranges predicted by long-term averages of means and covariances. The aim of conditional asset allocation strategies is to overcome…
The main objective of this paper is to develop a martingale-type solution to optimal consumption--investment choice problems ([Merton, 1969] and [Merton, 1971]) under time-varying incomplete preferences driven by externalities such as…
In a reinforcement learning (RL) framework, we study the exploratory version of the continuous time expected utility (EU) maximization problem with a portfolio constraint that includes widely-used financial regulations such as short-selling…