Related papers: Utility Maximization, Risk Aversion, and Stochasti…
The aim of this short note is to present a solution to the discrete time exponential utility maximization problem in a case where the underlying asset has a multivariate normal distribution. In addition to the usual setting considered in…
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 investigates well posedness of utility maximization problems for financial markets where stock returns depend on a hidden Gaussian mean reverting drift process. Since that process is potentially unbounded, well posedness cannot…
We provide a new characterization of second-order stochastic dominance, also known as increasing concave order. The result has an intuitive interpretation that adding a risk with negative expected value in adverse scenarios makes the…
In finance, sequential decision problems are often faced, for which reinforcement learning (RL) emerges as a promising tool for optimisation without the need of analytical tractability. However, the objective of classical RL is the expected…
This paper studies robust forward investment and consumption preferences and optimal strategies for a risk-averse and ambiguity-averse agent in an incomplete financial market with drift and volatility uncertainties. We focus on non-zero…
The paper studies an oligopolistic equilibrium model of financial agents who aim to share their random endowments. The risk-sharing securities and their prices are endogenously determined as the outcome of a strategic game played among all…
We consider the classical problem of maximizing the expected utility of terminal net wealth with a final random liability in a simple jump-diffusion model. In the spirit of Horst et al. (2014) and Santacroce-Trivellato (2014), under…
A continuous-time financial portfolio selection model with expected utility maximization typically boils down to solving a (static) convex stochastic optimization problem in terms of the terminal wealth, with a budget constraint. In…
We prove a general existence result in stochastic optimal control in discrete time where controls take values in conditional metric spaces, and depend on the current state and the information of past decisions through the evolution of a…
The problem of robust utility maximization in an incomplete market with volatility uncertainty is considered, in the sense that the volatility of the market is only assumed to lie between two given bounds. The set of all possible models…
This paper discusses the sensitivity of the long-term expected utility of optimal portfolios for an investor with constant relative risk aversion. Under an incomplete market given by a factor model, we consider the utility maximization…
This paper studies the problem of maximizing expected utility from terminal wealth combining a static position in derivative securities, which we assume can be traded only at time zero, with a traditional dynamic trading strategy in stocks.…
An empirical analysis, suggested by optimal Merton dynamics, reveals some unexpected features of asset volumes. These features are connected to traders' belief and risk aversion. This paper proposes a trading strategy model in the optimal…
In the context of a large class of stochastic processes used to describe the dynamics of wealth growth, we prove a set of inequalities establishing necessary and sufficient conditions in order to avoid infinite wealth concentration. These…
In the world of modern financial theory, portfolio construction has traditionally operated under at least one of two central assumptions: the constraints are derived from a utility function and/or the multivariate probability distribution…
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…
We consider an investor, whose portfolio consists of a single risky asset and a risk free asset, who wants to maximize his expected utility of the portfolio subject to the Value at Risk assuming a heavy tail distribution of the stock prices…
We consider the robust utility maximization using a static holding in derivatives and a dynamic holding in the stock. There is no fixed model for the price of the stock but we consider a set of probability measures (models) which are not…
We consider a single-period portfolio selection problem for an investor, maximizing the expected ratio of the portfolio utility and the utility of a best asset taken in hindsight. The decision rules are based on the history of stock returns…