Related papers: Utility Maximization, Risk Aversion, and Stochasti…
The present paper introduces a theoretical framework through which the degree of risk aversion with respect to uncertain prices can be measured through the context of the indirect utility function (IUF) using a lab experiment. First, the…
A classical portfolio theory deals with finding the optimal proportion in which an agent invests a wealth in a risk-free asset and a probabilistic risky asset. Formulating and solving the problem depend on how the risk is represented and…
We consider a continuous-time game-theoretic model of an investment market with short-lived assets and endogenous asset prices. The first goal of the paper is to formulate a stochastic equation which determines wealth processes of investors…
This paper studies the optimal risk-averse timing to sell a risky asset. The investor's risk preference is described by the exponential, power, or log utility. Two stochastic models are considered for the asset price -- the geometric…
We consider a long-term optimal investment problem where an investor tries to minimize the probability of falling below a target growth rate. From a mathematical viewpoint, this is a large deviation control problem. This problem will be…
This paper studies the optimal consumption under the addictive habit formation preference in markets with transaction costs and unbounded random endowments. To model the proportional transaction costs, we adopt the Kabanov's multi-asset…
This paper studies a life-cycle optimal portfolio-consumption problem when the consumption performance is measured by a shortfall aversion preference with an additional drawdown constraint on consumption rate. Meanwhile, the agent also…
We consider an expected utility maximization problem where the utility function is not necessarily concave and the time horizon is uncertain. We establish a necessary and sufficient condition for the optimality for general non-concave…
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…
The aim of this paper is to solve an optimal investment, consumption and life insurance problem when the investor is restricted to capital guarantee. We consider an incomplete market described by a jump-diffusion model with stochastic…
In this paper, we investigate dynamic optimization problems featuring both stochastic control and optimal stopping in a finite time horizon. The paper aims to develop new methodologies, which are significantly different from those of mixed…
Understanding the affective, cognitive and behavioural processes involved in risk taking is essential for treatment and for setting environmental conditions to limit damage. Using Temporal Difference Reinforcement Learning (TDRL) we…
In this paper, we consider $n$ agents who invest in a general financial market that is free of arbitrage and complete. The aim of each investor is to maximize her expected utility while ensuring, with a specified probability, that her…
Under expected utility the local index of absolute risk aversion has played a central role in many applications. Besides, its link with the "global" concepts of the risk and probability premia has reinforced its attractiveness. This paper…
An investor trades a safe and several risky assets with linear price impact to maximize expected utility from terminal wealth. In the limit for small impact costs, we explicitly determine the optimal policy and welfare, in a general…
The standard approach for constructing a Mean-Variance portfolio involves estimating parameters for the model using collected samples. However, since the distribution of future data may not resemble that of the training set, the…
We consider an investor who seeks to maximize her expected utility derived from her terminal wealth relative to the maximum performance achieved over a fixed time horizon, and under a portfolio drawdown constraint, in a market with local…
This paper discusses an alternative explanation for the empirical findings contradicting the positive relationship between risk (variance) and reward (expected return). We show that these contradicting results might be due to the false…
In this note, we study the utility maximization problem on the terminal wealth under proportional transaction costs and bounded random endowment. In particular, we restrict ourselves to the num\'eraire-based model and work with utility…
I introduce novel preference formulations which capture aversion to ambiguity about unknown and potentially time-varying volatility. I compare these preferences with Gilboa and Schmeidler's maxmin expected utility as well as variational…