Related papers: Portfolio Optimization under Habit Formation
We introduce a price impact model which accounts for finite market depth, tightness and resilience. Its coupled bid- and ask-price dynamics induce convex liquidity costs. We provide existence of an optimal solution to the classical problem…
We consider the problem of dynamic buying and selling of shares from a collection of $N$ stocks with random price fluctuations. To limit investment risk, we place an upper bound on the total number of shares kept at any time. Assuming that…
We study consumption dependence in the context of random utility and repeated choice. We show that, in the presence of consumption dependence, the random utility model is a misspecified model of repeated rational choice. This…
The choice of admissible trading strategies in mathematical modelling of financial markets is a delicate issue, going back to Harrison and Kreps (1979). In the context of optimal portfolio selection with expected utility preferences this…
We consider the Merton problem of optimizing expected power utility of terminal wealth in the case of an unobservable Markov-modulated drift. What makes the model special is that the agent is allowed to purchase costly expert opinions of…
Decision-changing imitation is a prevalent phenomenon in financial markets, where investors imitate others' decision-changing rates when making their own investment decisions. In this work, we study the optimal investment problem under the…
We study a discrete-time consumption-based capital asset pricing model under expectations-based reference-dependent preferences. More precisely, we consider an endowment economy populated by a representative agent who derives utility from…
We study optimal investment problems under the framework of cumulative prospect theory (CPT). A CPT investor makes investment decisions in a single-period financial market with transaction costs. The objective is to seek the optimal…
We study an intertemporal consumption and portfolio choice problem under Knightian uncertainty in which agent's preferences exhibit local intertemporal substitution. We also allow for market frictions in the sense that the pricing…
This paper introduces a novel stochastic control framework to enhance the capabilities of automated investment managers, or robo-advisors, by accurately inferring clients' investment preferences from past activities. Our approach leverages…
In this article we consider a special case of an optimal consumption/optimal portfolio problem first studied by Constantinides and Magill and by Davis and Norman, in which an agent with constant relative risk aversion seeks to maximise…
In a continuous time stochastic economy, this paper considers the problem of consumption and investment in a financial market in which the representative investor exhibits a change in the discount rate. The investment opportunities are a…
We study an optimal consumption and investment problem in a possibly incomplete market with general, not necessarily convex, stochastic constraints. We give explicit solutions for investors with exponential, logarithmic and power utility.…
This paper considers an optimal life insurance for a householder subject to mortality risk. The household receives a wage income continuously, which is terminated by unexpected (premature) loss of earning power or (planned and intended)…
We study the problem of maximising terminal utility for an agent facing model uncertainty, in a frictionless discrete-time market with one safe asset and finitely many risky assets. We show that an optimal investment strategy exists if the…
In the frictionless discrete time financial market of Bouchard et al.(2015) we consider a trader who, due to regulatory requirements or internal risk management reasons, is required to hedge a claim $\xi$ in a risk-conservative way relative…
This paper investigates the optimal retirement decision, investment, and consumption strategies in a market with jump diffusion, taking into account habit persistence and stock-wage correlation. Our analysis considers multiple stocks and a…
We develop a framework for stochastic portfolio theory (SPT), which incorporates modern nonlinear price impact and impact decay models. Our main result is the derivation of the celebrated master formula for additive functional generation of…
This paper is concerned with portfolio selection for an investor with power utility in multi-asset financial markets in a rough stochastic environment. We investigate Merton's portfolio problem for different multivariate Volterra models,…
In this paper, we consider a financial market with assets exposed to some risks inducing jumps in the asset prices, and which can still be traded after default times. We use a default-intensity modeling approach, and address in this…