Related papers: The continuous behavior of the numeraire portfolio…
We consider the terminal wealth utility maximization problem from the point of view of a portfolio manager who is paid by an incentive scheme, which is given as a convex function $g$ of the terminal wealth. The manager's own utility…
In this paper we study arbitrage theory of financial markets in the absence of a num\'eraire both in discrete and continuous time. In our main results, we provide a generalization of the classical equivalence between no unbounded profits…
We provide an axiomatic foundation for the representation of num\'{e}raire-invariant preferences of economic agents acting in a financial market. In a static environment, the simple axioms turn out to be equivalent to the following choice…
In this article we consider an optimization problem of expected utility maximization of continuous-time trading in a financial market. This trading is constrained by a benchmark for a utility-based shortfall risk measure. The market…
We study here numerically the behavior of an ideal gas like model of markets having only one non-consumable commodity. We investigate the behavior of the steady-state distributions of money, commodity and total wealth, as the dynamics of…
We study portfolio selection in a complete continuous-time market where the preference is dictated by the rank-dependent utility. As such a model is inherently time inconsistent due to the underlying probability weighting, we study the…
We consider the problem of utility maximization for small traders on incomplete financial markets. As opposed to most of the papers dealing with this subject, the investors' trading strategies we allow underly constraints described by…
Financial portfolio optimization is a widely studied problem in mathematics, statistics, financial and computational literature. It adheres to determining an optimal combination of weights associated with financial assets held in a…
This paper studies a portfolio optimization problem in a discrete-time Markovian model of a financial market, in which asset price dynamics depend on an external process of economic factors. There are transaction costs with a structure that…
Quantum theory is used to model secondary financial markets. Contrary to stochastic descriptions, the formalism emphasizes the importance of trading in determining the value of a security. All possible realizations of investors holding…
We analyze the stability of financial investment networks, where financial institutions hold overlapping portfolios of assets. We consider the effect of portfolio diversification and heterogeneous investments using a random matrix dynamical…
We use the martingale method to discuss the relationship between mean-variance (MV) and monotone mean-variance (MMV) portfolio selections. We propose a unified framework to discuss the relationship in general financial markets without any…
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…
With model uncertainty characterized by a convex, possibly non-dominated set of probability measures, the agent minimizes the cost of hedging a path dependent contingent claim with given expected success ratio, in a discrete-time,…
Classical mean-variance portfolio theory tells us how to construct a portfolio of assets which has the greatest expected return for a given level of return volatility. Utility theory then allows an investor to choose the point along this…
We consider a simplified version of the Wealth Game, which is an agent-based financial market model with many interesting features resembling the real stock market. Market makers are not present in the game so that the majority traders are…
We consider an ideal closed stock market, in which 100 traders have economic activities. The assets of the traders change through buying and selling stocks. We simulate the assets under conservation of both total currency and total number…
It has been assumed that arbitrage profits are not possible in efficient markets, because future prices are not predictable. Here we show that predictability alone is not a sufficient measure of market efficiency. We instead propose to…
The capitalization-weighted total relative variation $\sum_{i=1}^d \int_0^\cdot \mu_i (t) \mathrm{d} \langle \log \mu_i \rangle (t)$ in an equity market consisting of a fixed number $d$ of assets with capitalization weights $\mu_i (\cdot)$…
Value adjustment of uncollateralized trades is determined within a risk-neutral pricing framework. When hedging such trades, investors cannot freely trade protection on their own name, thus facing an incomplete market. This fact is…