Related papers: Exponential utility with non-negative consumption
This paper studies the continuous time utility maximization problem on consumption with addictive habit formation in incomplete semimartingale markets. Introducing the set of auxiliary state processes and the modified dual space, we embed…
We study equilibria of markets with $m$ heterogeneous indivisible goods and $n$ consumers with combinatorial preferences. It is well known that a competitive equilibrium is not guaranteed to exist when valuations are not gross substitutes.…
This paper considers an optimal life insurance for a householder subject to mortality risk. The household receives a wage income continuously, which is terminated by unexpected (premature) loss of earning power or (planned and intended)…
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 consider the problem of exponential utility indifference valuation under the simplified framework where traded and nontraded assets are uncorrelated but where the claim to be priced possibly depends on both. Traded asset prices follow a…
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…
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…
We study the utility indifference price of a European option in the context of small transaction costs. Considering the general setup allowing consumption and a general utility function at final time T, we obtain an asymptotic expansion of…
We consider a utility maximization problem in a broad class of markets. Apart from traditional semimartingale markets, our class of markets includes processes with long memory, fractional Brownian motion and related processes, and, in…
Exponential distribution is ubiquitous in the framework of multi-agent systems. An alternative approach with an economic motivation to derive the exponential distribution in the framework of iterations in the space of distributions is…
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…
This paper studies finite-time optimal consumption-investment problems with power, logarithmic and exponential utilities, in a regime switching market with random coefficients, subject to coupled constraints on the consumption and…
This paper investigates a time-inconsistent portfolio selection problem in the incomplete mar ket model, integrating expected utility maximization with risk control. The objective functional balances the expected utility and variance on log…
We treat a discrete-time asset allocation problem in an arbitrage-free, generically incomplete financial market, where the investor has a possibly non-concave utility function and wealth is restricted to remain non-negative. Under easily…
We consider two risk-averse financial agents who negotiate the price of an illiquid indivisible contingent claim in an incomplete semimartingale market environment. Under the assumption that the agents are exponential utility maximizers…
We develop a stochastic equilibrium model for an electricity market with asymmetric renewable energy forecasts. In our setting, market participants optimize their profits using public information about a conditional expectation of energy…
This chapter deals with our recent attempt to extend the notion of equilibrium (EQ) entropy to nonequilibrium (NEQ) systems so that it can also capture memory effects. This is done by enlarging the equilibrium state space by introducing…
We give explicit solutions for utility maximization of terminal wealth problem $u(X_T)$ in the presence of Knightian uncertainty in continuous time $[0,T]$ in a complete market. We assume there is uncertainty on both drift and volatility of…
Recent results, establishing evidence of intractability for such restrictive utility functions as additively separable, piecewise-linear and concave, under both Fisher and Arrow-Debreu market models, have prompted the question of whether we…
We develop a market model in which products generate state-dependent potential hidden charges. Firms differ in their ability to realize this potential. Unlike firms, consumers do not observe the state. They try to infer hidden charges from…