Related papers: Robust utility maximization for diffusion market m…

This work builds upon the long-standing conjecture that linear diffusion models are inadequate for complex market dynamics. Specifically, it provides experimental validation for the author's prior arguments that realistic market dynamics…

Volatility measures the amplitude of price fluctuations. Despite it is one of the most important quantities in finance, volatility is not directly observable. Here we apply a maximum likelihood method which assumes that price and volatility…

In this paper we investigate the expected terminal utility maximization approach for a dynamic stochastic portfolio optimization problem. We solve it numerically by solving an evolutionary Hamilton-Jacobi-Bellman equation which is…

In this article we study a multi-asset version of the Merton investment and consumption problem with proportional transaction costs. In general it is difficult to make analytical progress towards a solution in such problems, but we…

This paper proposes a portfolio construction framework designed to remain robust under estimation error, non-stationarity, and realistic trading constraints. The methodology combines dynamic asset eligibility, deterministic rebalancing, and…

In this paper, an optimization problem with uncertain constraint coefficients is considered. Possibility theory is used to model the uncertainty. Namely, a joint possibility distribution in constraint coefficient realizations, called…

Motivated by the AIG bailout case in the financial crisis of 2007-2008, we consider an insurer who wants to maximize the expected utility of the terminal wealth by selecting optimal investment and risk control strategies. The insurer's risk…

This paper extends the classical consumption and portfolio rules model in continuous time (Merton 1969, 1971) to the framework of decision-makers with time-inconsistent preferences. The model is solved for different utility functions for…

In this paper we derive the exact solution of the multi-period portfolio choice problem for an exponential utility function under return predictability. It is assumed that the asset returns depend on predictable variables and that the joint…

We consider a stochastic financial incomplete market where the price processes are described by a vector-valued semimartingale that is possibly nonlocally bounded. We face the classical problem of utility maximization from terminal wealth,…

We examine the problem of optimal portfolio allocation within the framework of utility theory. We apply exponential utility to derive the optimal diversification strategy and logarithmic utility to determine the optimal leverage. We enhance…

We consider robust pricing and hedging for options written on multiple assets given market option prices for the individual assets. The resulting problem is called the multi-marginal martingale optimal transport problem. We propose two…

In a fixed time horizon, appropriately executing a large amount of a particular asset -- meaning a considerable portion of the volume traded within this frame -- is challenging. Especially for illiquid or even highly liquid but also highly…

The subject of this paper is an optimal consumption/optimal portfolio problem with transaction costs and with multiple risky assets. In our model the transaction costs take a special form in that transaction costs on purchases of one of the…

Merton portfolio management problem is studied in this paper within a stochastic volatility, non constant time discount rate, and power utility framework. This problem is time inconsistent and the way out of this predicament is to consider…

We investigate the behavior of systems of interacting diffusion processes, known as volatility-stabilized market models in the mathematical finance literature, when the number of diffusions tends to infinity. We show that, after an…

This paper examines a continuous time intertemporal consumption and portfolio choice problem with a stochastic differential utility preference of Epstein-Zin type for a robust investor, who worries about model misspecification and seeks…

This paper discusses the num\'eraire-based utility maximization problem in markets with proportional transaction costs. In particular, the investor is required to liquidate all her position in stock at the terminal time. We first observe…

This paper considers exponential utility indifference pricing for a multidimensional non-traded assets model subject to inter-temporal default risk, and provides a semigroup approximation for the utility indifference price. The key tool is…

In the present work we develop a formalism to tackle the problem of optimal execution when trading market securities. More precisely, we introduce a utility function that balances market impact and timing risk, with this last being modelled…