Related papers: Exponential utility with non-negative consumption
We consider an agent who has access to a financial market, including derivative contracts, who looks to maximise her utility. Whilst the agent looks to maximise utility over one probability measure, or class of probability measures, she…
We provide four novel results for nonhomothetic Constant Elasticity of Substitution preferences (Hanoch, 1975). First, we derive a closed-form representation of the expenditure function of nonhomothetic CES under relatively flexible…
In this paper, we consider the problem of optimal investment by an insurer. The insurer invests in a market consisting of a bank account and $m$ risky assets. The mean returns and volatilities of the risky assets depend nonlinearly on…
The recent research report of U.S. Department of Energy prompts us to re-examine the pricing theories applied in electricity market design. The theory of spot pricing is the basis of electricity market design in many countries, but it has…
Equity premium, the surplus returns of stocks over bonds, has been an enduring puzzle. While numerous prior works approach the problem assuming the utility of money is invariant across contexts, our approach implies that in efficient…
We consider a stochastic financial incomplete market where the price processes are described by a vector-valued semimartingale that is possibly nonlocally bounded. We face the classical problem of utility maximization from terminal wealth,…
We introduce a novel approach to solving the optimal portfolio choice problem under Epstein-Zin utility with a time-varying consumption constraint, where analytical expressions for the value function and the dual value function are not…
In statistical physics, the conservation of particle number results in the equalization of the chemical potential throughout a system at equilibrium. In contrast, the homogeneity of utility in socio-economic models is usually thought to…
We consider the scenario where $N$ utilities strategically bid for electricity in the day-ahead market and balance the mismatch between the committed supply and actual demand in the real-time market, with uncertainty in demand and local…
The paper [12] examines a concept of equilibrium policies instead of optimal controls in stochastic optimization to analyze a mean-variance portfolio selection problem. We follow the same approach in order to investigate the Merton…
Starting from a plausible assumption about the Total Revenue concept, a system of economic agents, that simulates the exchange of goods, is studied. Following a methodology equivalent to that used in the statistical-mechanical determination…
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…
We pursue an inverse approach to utility theory and consumption & investment problems. Instead of specifying an agent's utility function and deriving her actions, we assume we observe her actions (i.e. her consumption and investment…
We introduce an extension to Merton's famous continuous time model of optimal consumption and investment, in the spirit of previous works by Pliska and Ye, to allow for a wage earner to have a random lifetime and to use a portion of the…
In this work we study a continuous time exponential utility maximization problem in the presence of a linear temporary price impact. More precisely, for the case where the risky asset is given by the Ornstein-Uhlenbeck diffusion process we…
We consider the design of prediction market mechanisms known as automated market makers. We show that we can design these mechanisms via the mold of \emph{exponential family distributions}, a popular and well-studied probability…
We propose a term structure power price model that, in contrast to widely accepted no-arbitrage based approaches, accounts for the non-storable nature of power. It belongs to a class of equilibrium game theoretic models with players divided…
We investigate expected utility maximization problems from the terminal liquidation value in continuous time in markets with transaction costs and one fixed consistent price system, where a non-concave utility function is defined on the…
The notion of utility maximising entropy (u-entropy) of a probability density, which was introduced and studied by Slomczynski and Zastawniak (Ann. Prob 32 (2004) 2261-2285, arXiv:math.PR/0410115 v1), is extended in two directions. First,…
This paper develops a theory of competitive equilibrium with indivisible goods based entirely on economic conditions on demand. The key idea is to analyze complementarity and substitutability between bundles of goods, rather than merely…