Related papers: CRRA Utility Maximization under Risk Constraints
We use one-step conditional risk mappings to formulate a risk averse version of a total cost problem on a controlled Markov process in discrete time infinite horizon. The nonnegative one step costs are assumed to be lower semi-continuous…
Risk-sensitive control balances performance with resilience to unlikely events in uncertain systems. This paper introduces ergodic-risk criteria, which capture long-term cumulative risks through probabilistic limit theorems. By ensuring the…
In this article we consider a special case of an optimal consumption/optimal portfolio problem first studied by Constantinides and Magill and by Davis and Norman, in which an agent with constant relative risk aversion seeks to maximise…
This paper presents a deep reinforcement learning (DRL) framework for dynamic portfolio optimization under market uncertainty and risk. The proposed model integrates a Sharpe ratio-based reward function with direct risk control mechanisms,…
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…
In this paper we study simulation based optimization algorithms for solving discrete time optimal stopping problems. This type of algorithms became popular among practioneers working in the area of quantitative finance. Using large…
We investigate constrained optimal control problems for linear stochastic dynamical systems evolving in discrete time. We consider minimization of an expected value cost over a finite horizon. Hard constraints are introduced first, and then…
This paper investigates the problem of maximizing expected terminal utility in a discrete-time financial market model with a finite horizon under non-dominated model uncertainty. We use a dynamic programming framework together with…
Conditional Value at Risk (CVaR) is widely used to account for the preferences of a risk-averse agent in the extreme loss scenarios. To study the effectiveness of randomization in interdiction games with an interdictor that is both risk and…
Previous studies into the budget constraint of portfolio optimization problems based on statistical mechanical informatics have not considered that the purchase cost per unit of each asset is distinct. Moreover, the fact that the optimal…
We consider an optimal investment and risk control problem for an insurer under the mean-variance (MV) criterion. By introducing a deterministic auxiliary process defined forward in time, we formulate an alternative time-consistent problem…
We study the problem of utility maximization from terminal wealth in which an agent optimally builds her portfolio by investing in a bond and a risky asset. The asset price dynamics follow a diffusion process with regime-switching…
We study the problem of incorporating risk while making combinatorial decisions under uncertainty. We formulate a discrete submodular maximization problem for selecting a set using Conditional-Value-at-Risk (CVaR), a risk metric commonly…
We develop a novel five-component decomposition of optimal dynamic portfolio choice, which reveals the simultaneous impacts from market incompleteness and wealth-dependent utilities. Under the HARA utility and a nonrandom interest rate, we…
This paper addresses the continuous-time portfolio selection problem under generalized disappointment aversion (GDA). The implicit definition of the certainty equivalent within GDA preferences introduces time inconsistency to this problem.…
Overconservatism has long been recognized as a major issue with robust optimization, despite its key advantages of tractability, performance guarantee, and limited information. To address this issue, a new criterion is proposed that can…
We derive a closed form portfolio optimization rule for an investor who is diffident about mean return and volatility estimates, and has a CRRA utility. The novelty is that confidence is here represented using ellipsoidal uncertainty sets…
This article's aim is to provide the solution to the equity premium puzzle without using calibrated values. Calibrated values of subjective time discount factor were used in my prior derived models because 4 variables were determined from 3…
This paper develops a method to derive optimal portfolios and risk premia explicitly in a general diffusion model for an investor with power utility and a long horizon. The market has several risky assets and is potentially incomplete.…
Conditional value-at-risk (CVaR) is a prominent risk measure in financial engineering, energy systems, and supply chain management. In these domains, Markov decision processes (MDPs) with a long-run CVaR criterion effectively mitigate cost…