Related papers: Optimal leverage from non-ergodicity
Following the paper by Algoet--Cover (1988), we analyse log-optimal portfolios where return evaluation includes `weights' of different outcomes. The results are twofold: (A) under certain conditions, logarithmic growth rate is a…
Betting markets are gaining in popularity. Mean beliefs generally differ from prices in prediction markets. Logarithmic utility is employed to study the risk and return adjustments to prices. Some consequences are described. A modified…
For a sequence of binary bets, the Kelly criterion provides a closed-form solution that maximizes the expected growth rate of wealth. In contrast, when multiple bets are placed simultaneously (e.g., in portfolio allocation or prediction…
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…
In the presence of ambiguity on the driving force of market randomness, we consider the dynamic portfolio choice without any predetermined investment horizon. The investment criteria is formulated as a robust forward performance process,…
We provide analytical results for a static portfolio optimization problem with two coherent risk measures. The use of two risk measures is motivated by joint decision-making for portfolio selection where the risk perception of the portfolio…
We consider an optimal investment and consumption problem for a Black-Scholes financial market with stochastic coefficients driven by a diffusion process. We assume that an agent makes consumption and investment decisions based on CRRA…
This paper studies some unconventional utility maximization problems when the ratio type relative portfolio performance is periodically evaluated over an infinite horizon. Meanwhile, the agent is prohibited from short-selling stocks. Our…
Solving large-scale robust portfolio optimization problems is challenging due to the high computational demands associated with an increasing number of assets, the amount of data considered, and market uncertainty. To address this issue, we…
A dynamic model of collective consumption and saving decisions made by a finite number of agents with constant but different discount rates is developed. Collective utility is a weighted sum of individual utilities with time-varying utility…
We consider an investor, whose portfolio consists of a single risky asset and a risk free asset, who wants to maximize his expected utility of the portfolio subject to the Value at Risk assuming a heavy tail distribution of the stock prices…
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 an arbitrage-free simple market, we demonstrate that for a class of state-dependent exponential utilities, there exists a unique prediction of the random risk aversion that ensures the consistency of optimal strategies across any time…
The gain-loss asymmetry, observed in the inverse statistics of stock indices is present for logarithmic return levels that are over $2\%$, and it is the result of the non-Pearson type auto-correlations in the index. These non-Pearson type…
This paper studies stability of the exponential utility maximization when there are small variations on agent's utility function. Two settings are considered. First, in a general semimartingale model where random endowments are present, a…
This paper studies a one-sector optimal growth model with i.i.d. productivity shocks that are allowed to be unbounded. The utility function is assumed to be non-negative and unbounded from above. The novel feature in our framework is that…
Multifractal processes are a relatively new tool of stock market analysis. Their power lies in the ability to take multiple orders of autocorrelations into account explicitly. In the first part of the paper we discuss the framework of the…
This paper examines optimal risk sharing for empirically realistic risk attitudes, providing results on Pareto optimality, competitive equilibria, utility frontiers, and the first and second theorems of welfare. Contrary to common…
The economic equities maximization criterion (MFPE) leads to the choice of financial portfolio, which maximizes the ratio of the expected value of the insurance company on the capital. This criterion is presented in the framework of a…
The current data explosion poses great challenges to the approximate aggregation with an efficiency and accuracy. To address this problem, we propose a novel approach to calculate the aggregation answers with a high accuracy using only a…