Related papers: Utility maximization in models with conditionally …
Modern portfolio theory(MPT) addresses the problem of determining the optimum allocation of investment resources among a set of candidate assets. In the original mean-variance approach of Markowitz, volatility is taken as a proxy for risk,…
We consider a general discrete-time financial market with proportional transaction costs as in [Kabanov, Stricker and R\'{a}sonyi Finance and Stochastics 7 (2003) 403--411] and [Schachermayer Math. Finance 14 (2004) 19--48]. In addition to…
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…
We study an iterative selection problem over N i.i.d. discrete-time stochastic processes with independent increments. At each stage, a fixed number of processes are retained based on their observed values. Under this simple model, we prove…
We study the problem of utility maximization from terminal wealth in which an agent optimally builds her portfolio by investing in a bond and a risky asset. The asset price dynamics follow a diffusion process with regime-switching…
We solve an expected utility-maximization problem with a Value-at-risk constraint on the terminal portfolio value in an incomplete financial market due to stochastic volatility. To derive the optimal investment strategy, we use the dynamic…
In this study, an optimization problem is proposed in order to obtain the maximum economic benefit from wind farms with variable and intermittent energy generation in the day ahead and balancing electricity markets. This method, which is…
In this paper we present a duality theory for the robust utility maximisation problem in continuous time for utility functions defined on the positive real axis. Our results are inspired by -- and can be seen as the robust analogues of --…
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 optimal control problem arising in the context of economic theory of growth, on the lines of the works by Skiba (1978) and Askenazy - Le Van (1999). The economic framework of the model is intertemporal infinite horizon…
We consider a utility maximization problem in a broad class of markets. Apart from traditional semimartingale markets, our class of markets includes processes with long memory, fractional Brownian motion and related processes, and, in…
This paper studies the utility maximization on the terminal wealth with random endowments and proportional transaction costs. To deal with unbounded random payoffs from some illiquid claims, we propose to work with the acceptable portfolios…
In this article we discuss the problem of calculating optimal model-independent (robust) bounds for the price of Asian options with discrete and continuous averaging. We will give geometric characterisations of the maximising and the…
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,…
The free energy functional has recently been proposed as a variational principle for bounded rational decision-making, since it instantiates a natural trade-off between utility gains and information processing costs that can be…
This paper studies the utility maximization problem with changing time horizons in the incomplete Brownian setting. We first show that the primal value function and the optimal terminal wealth are continuous with respect to the time horizon…
Consider power utility maximization of terminal wealth in a 1-dimensional continuous-time exponential Levy model with finite time horizon. We discretize the model by restricting portfolio adjustments to an equidistant discrete time grid.…
The maximum entropy principle can be used to assign utility values when only partial information is available about the decision maker's preferences. In order to obtain such utility values it is necessary to establish an analogy between…
We consider expected utility maximisation problem for exponential Levy models and HARA utilities in presence of illiquid asset in portfolio. This illiquid asset is modelled by an option of European type on another risky asset which is…
Decision theory has become widely accepted in the AI community as a useful framework for planning and decision making. Applying the framework typically requires elicitation of some form of probability and utility information. While much…