Related papers: Utility maximization in models with conditionally …
In this paper we deal with the utility maximization problem with a general utility function. We derive a new approach in which we reduce the utility maximization problem with general utility to the study of a fully-coupled Forward-Backward…
Assuming that agents' preferences satisfy first-order stochastic dominance, we show how the Expected Utility paradigm can rationalize all optimal investment choices: the optimal investment strategy in any behavioral law-invariant…
We investigate optimal consumption problems for a Black-Scholes market under uniform restrictions on Value-at-Risk and Expected Shortfall for logarithmic utility functions. We find the solutions in terms of a dynamic strategy in explicit…
Classic decision-theory is based on the maximum expected utility (MEU) principle, but crucially ignores the resource costs incurred when determining optimal decisions. Here we propose an axiomatic framework for bounded decision-making that…
We maximize the expected utility of terminal wealth in an incomplete market where there are cone constraints on the investor's portfolio process and the utility function is not assumed to be strictly concave or differentiable. We establish…
In this paper, we obtain a duality result for the exponential utility maximization problem where trading is subject to quadratic transaction costs and the investor is required to liquidate her position at the maturity date. As an…
We study linear policy approximations for the risk-conscious operation of an industrial energy system with uncertain wind power, significant and variable electricity demand, and high thermal output, as found in a modern foundry. The system…
Decentralized resource allocation is a key problem for large-scale autonomic (or self-managing) computing systems. Motivated by a data center scenario, we explore efficient techniques for resolving resource conflicts via cooperative…
We consider an insurance company modelling its surplus process by a Brownian motion with drift. Our target is to maximise the expected exponential utility of discounted dividend payments, given that the dividend rates are bounded by some…
Given the marginal distribution information of the underlying asset price at two future times $T_1$ and $T_2$, we consider the problem of determining a model-free upper bound on the price of a class of American options that must be…
We study risk-aware linear policy approximations for the optimal operation of an energy system with stochastic wind power, storage, and limited fuel. The resulting problem is a sequential decision-making problem with rolling forecasts. In…
We consider the problem of finding optimal strategies that maximize the average growth-rate of multiplicative stochastic processes. For a geometric Brownian motion the problem is solved through the so-called Kelly criterion, according to…
We study the most famous example of a large financial market: the Arbitrage Pricing Model, where investors can trade in a one-period setting with countably many assets admitting a factor structure. We consider the problem of maximising…
Motivated by recent developments in designing algorithms based on individual item scores for solving utility maximization problems, we study the framework of using test scores, defined as a statistic of observed individual item performance…
We study the optimal excess-of-loss reinsurance problem when both the intensity of the claims arrival process and the claim size distribution are influenced by an exogenous stochastic factor. We assume that the insurer's surplus is governed…
We study portfolio selection in a complete continuous-time market where the preference is dictated by the rank-dependent utility. As such a model is inherently time inconsistent due to the underlying probability weighting, we study the…
The sum-utility maximization problem is known to be important in the energy systems literature. The conventional assumption to address this problem is that the utility is concave. But for some key applications, such an assumption is not…
In this article, we study optimal investment and consumption in an incomplete stochastic factor model for a power utility investor on the infinite horizon. When the state space of the stochastic factor is finite, we give a complete…
Consider an investor trading dynamically to maximize expected utility from terminal wealth. Our aim is to study the dependence between her risk aversion and the distribution of the optimal terminal payoff. Economic intuition suggests that…
Utility based methods provide a very general theoretically consistent approach to pricing and hedging of securities in incomplete financial markets. Solving problems in the utility based framework typically involves dynamic programming,…