Related papers: Utility theory front to back - inferring utility f…
We consider an agent who has access to a financial market, including derivative contracts, who looks to maximise her utility. Whilst the agent looks to maximise utility over one probability measure, or class of probability measures, she…
In the large financial market, which is described by a model with countably many traded assets, we formulate the problem of the expected utility maximization. Assuming that the preferences of an economic agent are modeled with a stochastic…
In this paper we have devised an alternative methodological approach for quantifying utility in terms of expected information content of the decision-maker's choice set. We have proposed an extension to the concept of utility by…
We study the problem of maximising terminal utility for an agent facing model uncertainty, in a frictionless discrete-time market with one safe asset and finitely many risky assets. We show that an optimal investment strategy exists if the…
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 provide sufficient conditions under which a utility function may be recovered from a finite choice experiment. Identification, as is commonly understood in decision theory, is not enough. We provide a general recoverability result that…
Orseau and Ring, as well as Dewey, have recently described problems, including self-delusion, with the behavior of agents using various definitions of utility functions. An agent's utility function is defined in terms of the agent's history…
We consider the economic problem of optimal consumption and investment with power utility. We study the optimal strategy as the relative risk aversion tends to infinity or to one. The convergence of the optimal consumption is obtained for…
We investigate optimal consumption and investment problems for a Black-Scholes market under uniform restrictions on Value-at-Risk and Expected Shortfall. We formulate various utility maximization problems, which can be solved explicitly. We…
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…
In this paper, we investigate an optimal investment and consumption problem for an investor who trades in a Black--Scholes financial market with stochastic coefficients driven by a non-Gaussian Ornstein--Uhlenbeck process. We assume that an…
Modeling the purposeful behavior of imperfect agents from a small number of observations is a challenging task. When restricted to the single-agent decision-theoretic setting, inverse optimal control techniques assume that observed behavior…
We apply the maximum entropy principle to economic systems in equilibrium and find the density function for the market's wealth. This is the same as price density which is used for insurance pricing. The risk aversion parameter of the agent…
We propose a new approach to utilities that is consistent with state-dependent utilities. In our model utilities reflect the level of consumption satisfaction of flows of cash in future times as they are valued when the economic agents are…
Modeling the purposeful behavior of imperfect agents from a small number of observations is a challenging task. When restricted to the single-agent decision-theoretic setting, inverse optimal control techniques assume that observed behavior…
For an exponential utility maximizing investment strategy in a Black-Scholes Setting, fixed upper and lower constraints are introduced on the terminal wealth. This is equivalent to combining the optimal strategy with options. The resulting…
In this paper we investigate a utility maximization problem with drift uncertainty in a multivariate continuous-time Black-Scholes type financial market which may be incomplete. We impose a constraint on the admissible strategies that…
Random utility theory models an agent's preferences on alternatives by drawing a real-valued score on each alternative (typically independently) from a parameterized distribution, and then ranking the alternatives according to scores. A…
We study the utility maximization problem for power utility random fields in a semimartingale financial market, with and without intermediate consumption. The notion of an opportunity process is introduced as a reduced form of the value…
In the theory of social choice the research is focused around the projection of individual preference orders to the social preference order. Also, the justification of the preference order formalism begins with the concept of utility i.e.…