Related papers: Rationalizing Investors Choice
Most work in mechanism design assumes that buyers are risk neutral; some considers risk aversion arising due to a non-linear utility for money. Yet behavioral studies have established that real agents exhibit risk attitudes which cannot be…
In this paper we take a look at a simple portfolio insurance strategy using a protective put and computationally derive the investor's governing utility structures underlying such a strategy under alternative market scenarios. Investor…
We study a dynamic generalization of stochastic rationality in consumer behavior, the Dynamic Random Utility Model (DRUM). Under DRUM, a consumer draws a utility function from a stochastic utility process and maximizes this utility subject…
This study investigates an optimal investment problem for an insurance company operating under the Cramer-Lundberg risk model, where investments are made in both a risky asset and a risk-free asset. In contrast to other literature that…
In many real-world scenarios, the utility of a user is derived from the single execution of a policy. In this case, to apply multi-objective reinforcement learning, the expected utility of the returns must be optimised. Various scenarios…
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…
We provide sufficient conditions for semi-nonparametric point identification of a mixture model of decision making under risk, when agents make choices in multiple lines of insurance coverage (contexts) by purchasing a bundle. As a first…
We consider insurance derivatives depending on an external physical risk process, for example a temperature in a low dimensional climate model. We assume that this process is correlated with a tradable financial asset. We derive optimal…
The aim of this work consists in the study of the optimal investment strategy for a behavioural investor, whose preference towards risk is described by both a probability distortion and an S-shaped utility function. Within a continuous-time…
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…
Rewards typically express desirabilities or preferences over a set of alternatives. Here we propose that rewards can be defined for any probability distribution based on three desiderata, namely that rewards should be real-valued, additive…
An analyst observes the frequency with which a decision maker (DM) takes actions, but not the frequency conditional on payoff-relevant states. We ask when the analyst can rationalize the DM's choices as if the DM first learns something…
We establish when the two problems of minimizing a function of lifetime minimum wealth and of maximizing utility of lifetime consumption result in the same optimal investment strategy on a given open interval $O$ in wealth space. To answer…
In this paper, we propose a new class of optimization problems, which maximize the terminal wealth and accumulated consumption utility subject to a mean variance criterion controlling the final risk of the portfolio. The multiple-objective…
Welfare economics relies on access to agents' utility functions: we revisit classical questions in welfare economics, assuming access to data on agents' past choices instead of their utilities. Our main result considers the existence of…
We study Pareto efficiency in a pure-exchange economy where agents' preferences are represented by risk-averse monetary utilities. These coincide with law-invariant monetary utilities, and they can be shown to correspond to the class of…
In order to manage peak-grid events, utilities run incentive-based demand response (DR) programs in which they offer an incentive to assets who promise to curtail power consumption, and impose penalties if they fail to do so. We develop a…
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…
We maximize the expected utility of terminal wealth in an incomplete market where there are cone constraints on the investor's portfolio process and the utility function is not assumed to be strictly concave or differentiable. We establish…
This paper addresses the continuous-time portfolio selection problem under generalized disappointment aversion (GDA). The implicit definition of the certainty equivalent within GDA preferences introduces time inconsistency to this problem.…