Related papers: Portfolio Optimization under Habit Formation
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…
We consider a stochastic factor financial model where the asset price process and the process for the stochastic factor depend on an observable Markov chain and exhibit an affine structure. We are faced with a finite time investment horizon…
We consider an investor facing a classical portfolio problem of optimal investment in a log-Brownian stock and a fixed-interest bond, but constrained to choose portfolio and consumption strategies that reduce a dynamic shortfall risk…
This paper studies a life-cycle optimal portfolio-consumption problem when the consumption performance is measured by a shortfall aversion preference with an additional drawdown constraint on consumption rate. Meanwhile, the agent also…
The problem of designing a profit-maximizing, Bayesian incentive compatible and individually rational mechanism with flexible consumers and costly heterogeneous supply is considered. In our setup, each consumer is associated with a…
We consider a financial market model driven by an R^n-valued Gaussian process with stationary increments which is different from Brownian motion. This driving noise process consists of $n$ independent components, and each component has…
We revisit the problem of portfolio selection, where an investor maximizes utility subject to a risk constraint. Our framework is very general and accommodates a wide range of utility and risk functionals, including non-concave utilities…
We consider a stochastic model of investment on an asset of a stock market for a prudent investor. She decides to buy permanent goods with a fraction $\a$ of the maximum amount of money owned in her life in order that her economic level…
We study a utility maximization problem in a financial market with a stochastic drift process, combining a worst-case approach with filtering techniques. Drift processes are difficult to estimate from asset prices, and at the same time…
Ergodicity describes an equivalence between the expectation value and the time average of observables. Applied to human behaviour, ergodic theories of decision-making reveal how individuals should tolerate risk in different environments. To…
We study a n-player and mean-field portfolio optimization problem under relative performance concerns with non-zero volatility, for wealth and consumption. The consistency assumption defining forward relative performance processes leads to…
We find the optimal investment strategy to minimize the expected time that an individual's wealth stays below zero, the so-called {\it occupation time}. The individual consumes at a constant rate and invests in a Black-Scholes financial…
This paper builds a rule for decisionmaking from the physical behavior of single neurons, the well established neural circuitry of mutual inhibition, and the evolutionary principle of natural selection. No axioms are used in the derivation…
In this paper, we study a stochastic optimal control problem with stochastic volatility. We prove the sufficient and necessary maximum principle for the proposed problem. Then we apply the results to solve an investment, consumption and…
In this paper, we develop an expected utility model for the retirement behavior in the decumulation phase of Australian retirees with sequential family status subject to consumption, housing, investment, bequest and government provided…
We consider classical Merton problem of terminal wealth maximization in finite horizon. We assume that the drift of the stock is following Ornstein-Uhlenbeck process and the volatility of it is following GARCH(1) process. In particular,…
Obtaining utility maximizing optimal portfolios in closed form is a challenging issue when the return vector follows a more general distribution than the normal one. In this note, we give closed form expressions, in markets based on…
We present an optimal investment theorem for a currency exchange model with random and possibly discontinuous proportional transaction costs. The investor's preferences are represented by a multivariate utility function, allowing for…
In this paper, we develop a deep neural network approach to solve a lifetime expected mortality-weighted utility-based model for optimal consumption in the decumulation phase of a defined contribution pension system. We formulate this…
Even in the face of deteriorating and highly volatile demand, firms often invest in, rather than discard, aging technologies. In order to study this phenomenon, we model the firm's profit stream as a Brownian motion with negative drift. At…