Related papers: Optimal investment with counterparty risk: a defau…
A new procedure is presented for the objective comparison and evaluation of default definitions. This allows the lender to find a default threshold at which the financial loss of a loan portfolio is minimised, in accordance with Basel II.…
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…
We study an optimal dividend problem for an insurer who simultaneously controls investment weights in a financial market, liability ratio in the insurance business, and dividend payout rate. The insurer seeks an optimal strategy to maximize…
In this article, we consider the optimal investment-consumption problem for an agent with preferences governed by Epstein--Zin stochastic differential utility (EZ-SDU) who invests in a constant-parameter Black-Scholes-Merton market over the…
This paper studies Merton's problem in an extended formulation by incorporating the benchmark tracking on the wealth process. We consider a tracking formulation where the fund manager aims to maximize the trade-off between the expected…
In this paper we consider a modification of the classical Merton portfolio optimization problem. Namely, an investor can trade in financial asset and consume his capital. He is additionally endowed with a one unit of an indivisible asset…
In this paper, we study expected utility maximization under ratchet and drawdown constraints on consumption in a general incomplete semimartingale market using duality methods. The optimization is considered with respect to two parameters:…
The paper investigates the consumption-investment problem for an investor with Epstein-Zin utility in an incomplete market. Closed, not necessarily convex, constraints are imposed on strategies. The optimal consumption and investment…
This article constructs a forward exponential utility in a market with multiple defaultable risks. Using the Jacod-Pham decomposition for random fields, we first characterize forward performance processes in a defaultable market under the…
In this paper, we consider a risk-based optimal investment problem of an insurer in a regime-switching jump diffusion model with noisy memory. Using the model uncertainty modeling, we formulate the investment problem as a zero-sum,…
This paper studies the problem of optimal investment in incomplete markets, robust with respect to stopping times. We work on a Brownian motion framework and the stopping times are adapted to the Brownian filtration. Robustness can only be…
A solution to a portfolio optimization problem is always conditioned by constraints on the initial capital and the price of the available market assets. If a risk neutral measure is known, then the price of each asset is the discounted…
This article studies the sensitivity of the power utility maximization problem with respect to the investor's relative risk aversion, the statistical probability measure, the investment constraints and the market price of risk. We extend…
A continuous-time financial portfolio selection model with expected utility maximization typically boils down to solving a (static) convex stochastic optimization problem in terms of the terminal wealth, with a budget constraint. In…
Any firm whose business strategy has an exposure constraint that limits its potential gain naturally considers expansion, as this can increase its exposure. We model business expansion as an enlargement of the opportunity set for business…
We analyze the practical consequences of the bilateral counterparty risk adjustment. We point out that past literature assumes that, at the moment of the first default, a risk-free closeout amount will be used. We argue that the legal…
This paper sets up a methodology for approximately solving optimal investment problems using duality methods combined with Monte Carlo simulations. In particular, we show how to tackle high dimensional problems in incomplete markets, where…
We consider the optimal risk transfer from an insurance company to a reinsurer. The problem formulation considered in this paper is closely connected to the optimal portfolio problem in finance, with some crucial distinctions. In…
We study the optimal investment problem for a continuous time incomplete market model such that the risk-free rate, the appreciation rates and the volatility of the stocks are all random; they are assumed to be independent from the driving…
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.…