Related papers: Leverage efficiency
We consider a stochastic game-theoretic model of an investment market in continuous time with short-lived assets and study strategies, called survival, which guarantee that the relative wealth of an investor who uses such a strategy remains…
Reducing financial risk is of paramount importance to investors, financial institutions, and corporations. Since the pioneering contribution of Johnson (1960), the optimal hedge ratio based on futures is regularly utilized. The current…
In the seminal paper on optimal execution of portfolio transactions, Almgren and Chriss (2001) define the optimal trading strategy to liquidate a fixed volume of a single security under price uncertainty. Yet there exist situations, such as…
This paper addresses the long-standing challenge of estimating the leverage effect from high-frequency data contaminated by dependent, non-Gaussian microstructure noise. We depart from the conventional reliance on pre-averaging or…
This paper investigates optimal portfolio strategies in a financial market where the drift of the stock returns is driven by an unobserved Gaussian mean reverting process. Information on this process is obtained from observing stock returns…
We show that financial correlations exhibit a non-trivial dynamic behavior. We introduce a simple phenomenological model of a multi-asset financial market, which takes into account the impact of portfolio investment on price dynamics. This…
This paper studies dynamic asset allocation with interest rate risk and several sources of ambiguity. The market consists of a risk-free asset, a zero-coupon bond (both determined by a Vasicek model), and a stock. There is ambiguity about…
This paper proposes a theory of stock market predictability patterns based on a model of heterogeneous beliefs. In a discrete finite time framework, some agents receive news about an asset's fundamental value through a noisy signal. The…
Most decision theories, including expected utility theory, rank dependent utility theory and cumulative prospect theory, assume that investors are only interested in the distribution of returns and not in the states of the economy in which…
Existence of stochastic financial equilibria giving rise to semimartingale asset prices is established under a general class of assumptions. These equilibria are expressed in real terms and span complete markets or markets with withdrawal…
This thesis mainly focuses on two problems in capital structure and individual's life-cycle portfolio choice. In the first problem, we derive a stochastic control model to optimize banks' dividend and recapitalization policies and calibrate…
We derive new results related to the portfolio choice problem for power and logarithmic utilities. Assuming that the portfolio returns follow an approximate log-normal distribution, the closed-form expressions of the optimal portfolio…
We consider a popular model of microeconomics with countably many assets: the Arbitrage Pricing Model. We study the problem of optimal investment under an expected utility criterion and look for conditions ensuring the existence of optimal…
We consider a continuous-time market with proportional transaction costs. Under appropriate assumptions we prove the existence of optimal strategies for investors who maximize their worst-case utility over a class of possible models. We…
We propose a new volatility model based on two stylized facts of the volatility in the stock market: clustering and leverage effect. We calibrate our model parameters, in the leading order, with 77 years Dow Jones Industrial Average data.…
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…
This paper introduces a novel stochastic control framework to enhance the capabilities of automated investment managers, or robo-advisors, by accurately inferring clients' investment preferences from past activities. Our approach leverages…
A hypothetical risk-neutral agent who trades to maximize the expected profit of the next trade will approximately exhibit long-term optimal behavior as long as this agent uses the vector $p = \nabla V (t, x)$ as effective microstructure…
Large scale electricity storage is set to play an increasingly important role in the management of future energy networks. A major aspect of the economics of such projects is captured in arbitrage, i.e. buying electricity when it is cheap…
This paper is concerned with an optimal investment problem under correlated noises in the financial market, and the expected utility functional is hyperbolic absolute risk aversion (HARA) with the exponent $\gamma\neq0$. The problem can be…