Related papers: Do arbitrage-free prices come from utility maximiz…
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…
Within the well-known framework of financial portfolio optimization, we analyze the existing relationships between the condition of arbitrage and the utility maximization in presence of \emph{insider information}. We assume that, since the…
We study a dynamic asset pricing problem in which a representative agent is ambiguous about the aggregate endowment growth rate and trades a risky stock, human capital, and a risk-free asset to maximize her preference value of consumption…
We consider the problem of optimal investment with intermediate consumption in a general semimartingale model of an incomplete market, with preferences being represented by a utility stochastic field. We show that the key conclusions of the…
This paper studies arbitrage pricing theory in financial markets with implicit transaction costs. We extend the existing theory to include the more realistic possibility that the price at which the investors trade is dependent on the traded…
We consider the robust utility maximization using a static holding in derivatives and a dynamic holding in the stock. There is no fixed model for the price of the stock but we consider a set of probability measures (models) which are not…
This paper studies the problem of maximizing expected utility from terminal wealth combining a static position in derivative securities, which we assume can be traded only at time zero, with a traditional dynamic trading strategy in stocks.…
We study a robust utility maximization problem in a general discrete-time frictionless market under quasi-sure no-arbitrage. The investor is assumed to have a random and concave utility function defined on the whole real-line. She also…
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…
An investor with constant absolute risk aversion trades a risky asset with general It\^o-dynamics, in the presence of small proportional transaction costs. In this setting, we formally derive a leading-order optimal trading policy and the…
We consider portfolio selection under nonparametric $\alpha$-maxmin ambiguity in the neighbourhood of a reference distribution. We show strict concavity of the portfolio problem under ambiguity aversion. Implied demand functions are…
"Fundamental theorem of asset pricing" roughly states that absence of arbitrage opportunity in a market is equivalent to the existence of a risk-neutral probability. We give a simple counterexample to this oversimplified statement. Prices…
We consider infinite dimensional optimization problems motivated by the financial model called Arbitrage Pricing Theory. Using probabilistic and functional analytic tools, we provide a dual characterization of the super-replication cost.…
We treat utility maximization from terminal wealth for an agent with utility function $U:\mathbb{R}\to\mathbb{R}$ who dynamically invests in a continuous-time financial market and receives a possibly unbounded random endowment. We prove the…
We study the formation of derivative prices in equilibrium between risk-neutral agents with heterogeneous beliefs about the dynamics of the underlying. Under the condition that the derivative cannot be shorted, we prove the existence of a…
Consider a discrete-time infinite horizon financial market model in which the logarithm of the stock price is a time discretization of a stochastic differential equation. Under conditions different from those given in a previous paper of…
This paper is concerned with the study of insurance related derivatives on financial markets that are based on non-tradable underlyings, but are correlated with tradable assets. We calculate exponential utility-based indifference prices,…
We study a general robust utility maximization problem in a discrete-time frictionless market. The investor is assumed to have a possibly infinite, random, nonconcave, and nondecreasing utility function defined on the whole real line. She…
A speculative agent with Prospect Theory preference chooses the optimal time to purchase and then to sell an indivisible risky asset to maximize the expected utility of the round-trip profit net of transaction costs. The optimization…
A market model with $d$ assets in discrete time is considered where trades are subject to proportional transaction costs given via bid-ask spreads, while the existence of a num\`eraire is not assumed. It is shown that robust no arbitrage…