Related papers: Mean-Variance and Expected Utility: The Borch Para…
In this paper, we investigate mean-variance (MV) portfolio selection problems with jumps in a regime-switching financial model. The novelty of our approach lies in allowing not only the market parameters -- such as the interest rate,…
Under mean-variance-utility framework, we propose a new portfolio selection model, which allows wealth and time both have influences on risk aversion in the process of investment. We solved the model under a game theoretic framework and…
The standard approach to risk-averse control is to use the Exponential Utility (EU) functional, which has been studied for several decades. Like other risk-averse utility functionals, EU encodes risk aversion through an increasing convex…
Ambiguity and ambiguity aversion have been widely studied in decision theory and economics both at a theoretical and an experimental level. After Ellsberg's seminal studies challenging subjective expected utility theory (SEUT), several…
Value-at-Risk (VaR) and Conditional Value-at-Risk (CVaR) are popular risk measures from academic, industrial and regulatory perspectives. The problem of minimizing CVaR is theoretically known to be of Neyman-Pearson type binary solution. We…
The paper discusses capital allocation using the Euler formula and focuses on the risk measures Value-at-Risk (VaR) and Expected shortfall (ES). Some new results connected to this capital allocation is known. Two examples illustrate that…
The random utility model, a cornerstone in economics, is axiomatized by Falmagne (1978) and McFadden and Richter (1990) with the assumption that if a menu is observable, the choice frequencies of all alternatives are also observable.…
Proof that under simple assumptions, such as constraints of Put-Call Parity, the probability measure for the valuation of a European option has the mean derived from the forward price which can, but does not have to be the risk-neutral one,…
We consider market players with tail-risk-seeking behaviour as exemplified by the S-shaped utility introduced by Kahneman and Tversky. We argue that risk measures such as value at risk (VaR) and expected shortfall (ES) are ineffective in…
We investigate a continuous-time investment-consumption problem with model uncertainty in a general diffusion-based market with random model coefficients. We assume that a power utility investor is ambiguity-averse, with the preference to…
We derive new results related to the portfolio choice problem for power and logarithmic utilities. Assuming that the portfolio returns follow an approximate log-normal distribution, the closed-form expressions of the optimal portfolio…
Majority voting (MV) is the prototypical ``wisdom of the crowd'' algorithm. Theorems considering when MV is optimal for group decisions date back to Condorcet's 1785 jury \emph{decision} theorem. The same error independence assumption…
This paper discusses an alternative explanation for the empirical findings contradicting the positive relationship between risk (variance) and reward (expected return). We show that these contradicting results might be due to the false…
We consider an expected utility maximization problem where the utility function is not necessarily concave and the time horizon is uncertain. We establish a necessary and sufficient condition for the optimality for general non-concave…
In his famous paper, Markowitz (1952) derived the dependence of portfolio random returns on the random returns of its securities. This result allowed Markowitz to obtain his famous expression for portfolio variance. We show that Markowitz's…
We consider an optimal investment and risk control problem for an insurer under the mean-variance (MV) criterion. By introducing a deterministic auxiliary process defined forward in time, we formulate an alternative time-consistent problem…
The multivariate coefficient of variation (MCV) is an attractive and easy-to-interpret effect size for the dispersion in multivariate data. Recently, the first inference methods for the MCV were proposed by Ditzhaus and Smaga (2022) for…
The problem of robust utility maximization in an incomplete market with volatility uncertainty is considered, in the sense that the volatility of the market is only assumed to lie between two given bounds. The set of all possible models…
Mutually exclusive decisions have been studied for decades. Many well-known decision theories have been defined to help people either to make rational decisions or to interpret people's behaviors, such as expected utility theory, regret…
The enterprise value (EV) is a crucial metric in company valuation as it encompasses not only equity but also assets and liabilities, offering a comprehensive measure of total value, especially for companies with diverse capital structures.…