Related papers: On Investment-Consumption with Regime-Switching
The paper investigates the consumption-investment problem for an investor with Epstein-Zin utility in an incomplete market. Closed, not necessarily convex, constraints are imposed on strategies. The optimal consumption and investment…
In this paper we study a continuous time, optimal stochastic investment problem under limited resources in a market with N firms. The investment processes are subject to a time-dependent stochastic constraint. Rather than using a dynamic…
Market participants regularly send bid and ask quotes to exchange-operated limit order books. This creates an optimization challenge where their potential profit is determined by their quoted price and how often their orders are…
We study the Proportional Response dynamic in exchange economies, where each player starts with some amount of money and a good. Every day, the players bring one unit of their good and submit bids on goods they like, each good gets…
We present analytical investigations of a multiplicative stochastic process that models a simple investor dynamics in a random environment. The dynamics of the investor's budget, $x(t)$, depends on the stochasticity of the return on…
The paper tests the validity of the critique of the fiscal theory of the price level. A stochastic general equilibrium model with continuous time is constructed. An active fiscal policy and a passive monetary policy have been set. Monetary…
Existence of stochastic financial equilibria giving rise to semimartingale asset prices is established under a general class of assumptions. These equilibria are expressed in real terms and span complete markets or markets with withdrawal…
In this paper, we introduce a large system of interacting financial agents in which each agent is faced with the decision of how to allocate his capital between a risky stock or a risk-less bond. The investment decision of investors,…
We propose a continuous-time stock-flow consistent model for inventory dynamics in an economy with firms, banks, and households. On the supply side, firms decide on production based on adaptive expectations for sales demand and a desired…
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…
In this paper, we study an intertemporal utility maximization problem in which an investor chooses consumption and portfolio strategies in the presence of a stochastic factor and a no-borrowing constraint. In the spirit of the Kim-Omberg…
We study discrete-time Markov Decision Processes (MDPs) on finite state-action spaces and analyze the stability of optimal policies and value functions in the long-run discounted risk-sensitive objective setting. Our analysis addresses…
This paper studies a life-time consumption-investment problem under the Black-Scholes framework, where the consumption rate is subject to a lower bound constraint that linearly depends on her wealth. It is a stochastic control problem with…
This paper considers the discounted criterion of nonzero-sum decentralized stochastic games with prospect players. The state and action spaces are finite. The state transition probability is nonstationary. Each player independently controls…
We investigate a linear quadratic stochastic zero-sum game where two players lobby a political representative to invest in a wind turbine farm. Players are time-inconsistent because they discount performance with a non-constant rate. Our…
Consider the problem of a government that wants to reduce the debt-to-GDP (gross domestic product) ratio of a country. The government aims at choosing a debt reduction policy which minimises the total expected cost of having debt, plus the…
In this paper, the Kyle model of insider trading is extended by characterizing the trading volume with long memory and allowing the noise trading volatility to follow a general stochastic process. Under this newly revised model, the…
We demonstrate a limitation of discounted expected utility, a standard approach for representing the preference to risk when future cost is discounted. Specifically, we provide an example of the preference of a decision maker that appears…
This paper considers a stochastic production planning problem with regime switching. There are two regimes corresponding to different economic cycles. A factory is planning its production so as to minimize production costs. We analyze this…
We analyze the efficiency of markets with friction, particularly power markets. We model the market as a dynamic system with $(d_t;\,t\geq 0)$ the demand process and $(s_t;\,t\geq 0)$ the supply process. Using stochastic differential…