Related papers: Robust utility maximization in non-dominated model…
We investigate optimal consumption and investment problems for a Black-Scholes market under uniform restrictions on Value-at-Risk and Expected Shortfall. We formulate various utility maximization problems, which can be solved explicitly. We…
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…
We consider the problem of maximizing expected utility from terminal wealth in models with stochastic factors. Using martingale methods and a conditioning argument, we determine the optimal strategy for power utility under the assumption…
In this paper we provide a complete theoretical analysis of a two-dimensional degenerate non convex singular stochastic control problem. The optimisation is motivated by a storage-consumption model in an electricity market, and features a…
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…
This paper studies a one-sector optimal growth model with i.i.d. productivity shocks that are allowed to be unbounded. The utility function is assumed to be non-negative and unbounded from above. The novel feature in our framework is that…
This paper revisits the classic instrument choice problem in a setting with consumption externalities, through the lens of robust mechanism design. A regulator can implement any incentive-compatible policy but is uncertain about how…
We consider an infinite dimensional optimization problem motivated by mathematical economics. Within the celebrated "Arbitrage Pricing Model", we use probabilistic and functional analytic techniques to show the existence of optimal…
Economists often estimate economic models on data and use the point estimates as a stand-in for the truth when studying the model's implications for optimal decision-making. This practice ignores model ambiguity, exposes the decision…
This paper addresses the question of how to invest in a robust growth-optimal way in a market where the instantaneous expected return of the underlying process is unknown. The optimal investment strategy is identified using a generalized…
We consider a general discrete-time financial market with proportional transaction costs as in [Kabanov, Stricker and R\'{a}sonyi Finance and Stochastics 7 (2003) 403--411] and [Schachermayer Math. Finance 14 (2004) 19--48]. In addition to…
In an incomplete model, where under an appropriate num\'eraire, the stock price process is driven by a sigma-bounded semimartingale, we investigate the behavior of the expected utility maximization problem under small perturbations of the…
We discuss an optimal investment, consumption and insurance problem of a wage earner under inflation. Assume a wage earner investing in a real money account and three asset prices, namely: a real zero coupon bond, the inflation-linked real…
This paper expands the notion of robust profit opportunities in financial markets to incorporate distributional uncertainty using Wasserstein distance as the ambiguity measure. Financial markets with risky and risk-free assets are…
We examine the issue of sensitivity with respect to model parameters for the problem of utility maximization from final wealth in an incomplete Samuelson model and mainly, but not exclusively, for utility functions of positive power-type.…
In this paper, we obtain a duality result for the exponential utility maximization problem where trading is subject to quadratic transaction costs and the investor is required to liquidate her position at the maturity date. As an…
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…
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…
In this paper a class of optimization problems with uncertain linear constraints is discussed. It is assumed that the constraint coefficients are random vectors whose probability distributions are only partially known. Possibility theory is…
We investigate optimal consumption problems for a Black-Scholes market under uniform restrictions on Value-at-Risk and Expected Shortfall for logarithmic utility functions. We find the solutions in terms of a dynamic strategy in explicit…