Related papers: Optimal Payoffs under State-dependent Preferences
This paper studies the robust portfolio selection problem under a state-dependent confidence set. The investor invests in a financial market with a risk-free asset and a risky asset. The ambiguity-averse investor faces uncertainty over the…
This paper studies an optimal investing problem for a retiree facing longevity risk and living standard risk. We formulate the investing problem as a portfolio choice problem under a time-varying risk capacity constraint. We derive the…
We revisit the problem of portfolio selection, where an investor maximizes utility subject to a risk constraint. Our framework is very general and accommodates a wide range of utility and risk functionals, including non-concave utilities…
We consider "time-of-use" pricing as a technique for matching supply and demand of temporal resources with the goal of maximizing social welfare. Relevant examples include energy, computing resources on a cloud computing platform, and…
We propose an algorithm to calculate the exact solution for utility optimization problems on finite state spaces under a class of non-differentiable preferences. We prove that optimal strategies must lie on a discrete grid in the plane, and…
This paper presents a method for incorporating risk aversion into existing decision tree models used in economic evaluations. The method involves applying a probability weighting function based on rank dependent utility theory to reduced…
This paper considers a distributed stochastic optimization problem where the goal is to minimize the time average of a cost function subject to a set of constraints on the time averages of a related stochastic processes called penalties. We…
We study the utility maximization problem for power utility random fields in a semimartingale financial market, with and without intermediate consumption. The notion of an opportunity process is introduced as a reduced form of the value…
We study the Merton portfolio management problem within a complete market, non constant time discount rate and general utility framework. The non constant discount rate introduces time inconsistency which can be solved by introducing sub…
This paper is concerned with the maximum principle of stochastic optimal control problems, where the coefficients of the state equation and the cost functional are uncertain, and the system is generally under Markovian regime switching.…
Many policies allocate harms or benefits that are uncertain in nature: they produce distributions over the population in which individuals have different probabilities of incurring harm or benefit. Comparing different policies thus involves…
We develop a complete analysis of a general entry-exit-scrapping model. In particular, we consider an investment project that operates within a random environment and yields a payoff rate that is a function of a stochastic economic…
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…
Analyzing decision problems under uncertainty commonly relies on idealizing assumptions about the describability of the world, with the most prominent examples being the closed world and the small world assumption. Most assumptions are…
We consider a model where an agent has a repeated decision to make and wishes to maximize their total payoff. Payoffs are influenced by an action taken by the agent, but also an unknown state of the world that evolves over time. Before…
This paper considers an optimal life insurance for a householder subject to mortality risk. The household receives a wage income continuously, which is terminated by unexpected (premature) loss of earning power or (planned and intended)…
In this short note, we address two issues in the literature about modern tontines with bequest and utility maximisation: how to verify optimal controls and the decreasing allocation of funds in the tontine. We want to raise awareness in the…
Modern portfolio theory(MPT) addresses the problem of determining the optimum allocation of investment resources among a set of candidate assets. In the original mean-variance approach of Markowitz, volatility is taken as a proxy for risk,…
Selective labels are a common feature of consequential decision-making applications, referring to the lack of observed outcomes under one of the possible decisions. This paper reports work in progress on learning decision policies in the…
Markov decision processes (MDPs) are the defacto frame-work for sequential decision making in the presence ofstochastic uncertainty. A classical optimization criterion forMDPs is to maximize the expected discounted-sum pay-off, which…