Related papers: Optimal Payoffs under State-dependent Preferences
Some researchers speculate that intelligent reinforcement learning (RL) agents would be incentivized to seek resources and power in pursuit of their objectives. Other researchers point out that RL agents need not have human-like…
Motivated by the AIG bailout case in the financial crisis of 2007-2008, we consider an insurer who wants to maximize the expected utility of the terminal wealth by selecting optimal investment and risk control strategies. The insurer's risk…
We present a methodology for obtaining explicit solutions to infinite time horizon optimal stopping problems involving general, one-dimensional, It\^o diffusions, payoff functions that need not be smooth and state-dependent discounting.…
We propose and axiomatize preferences on a product state space in light of uncertainty regarding the dependency of different payoff-relevant factors. Dependence structures allow to decompose probabilities and allow to pin down behavior…
Many real-world problems require making sequences of decisions where the outcomes of each decision are probabilistic and uncertain, and the availability of different actions is constrained by the outcomes of previous actions. There is a…
This paper studies the income fluctuation problem with capital income risk (i.e., dispersion in the rate of return to wealth). Wealth returns and labor earnings are allowed to be serially correlated and mutually dependent. Rewards can be…
We adress the maximization problem of expected utility from terminal wealth. The special feature of this paper is that we consider a financial market where the price process of risky assets can have a default time. Using dynamic…
The optimal taxation of assets requires attention to two concerns: 1) the elasticity of the supply of assets and 2) the impact of taxing assets on distributional objectives. The most efficient way to attend to these two concerns is to tax…
Sharpe et al. proposed the idea of having an expected utility maximizer choose a probability distribution for future wealth as an input to her investment problem instead of a utility function. They developed a computer program, called The…
This paper focuses on stochastic orders and its applications : policy limits and deductibles. Further, many applications and some examples are given : comparison of two families of copulas, individual and collective risk model, reinsurance…
Default risk significantly affects the corporate policies of a firm. We develop a model in which a limited liability entity subject to Poisson default shock jointly sets its dividend policy and capital structure to maximize the expected…
Turnpike theorems state that if an investor's utility is asymptotically equivalent to a power utility, then the optimal investment strategy converges to the CRRA strategy as the investment horizon tends to infinity. This paper aims to…
Portfolio optimization methods suffer from a catalogue of known problems, mainly due to the facts that pair correlations of asset returns are unstable, and that extremal risk measures such as maximum drawdown are difficult to predict due to…
The effectiveness of utility-maximization techniques for portfolio management relies on our ability to estimate correctly the parameters of the dynamics of the underlying financial assets. In the setting of complete or incomplete financial…
A decision maker (DM) has some funds invested through two investment firms. She wishes to allocate additional funds according to the firms' earnings. The DM, on the one hand, tries to maximize the total expected earnings, while the firms,…
We study investment and insurance demand decisions for an agent in a theoretical continuous-time expected utility maximization model that combines risky assets with an (exogenous) insurable background risk. This risk takes the form of a…
Adopting a probabilistic approach we determine the optimal dividend payout policy of a firm whose surplus process follows a controlled arithmetic Brownian motion and whose cash-flows are discounted at a stochastic dynamic rate. Dividends…
Uncertainties from deepening penetration of renewable energy resources have posed critical challenges to the secure and reliable operations of future electric grids. Among various approaches for decision making in uncertain environments,…
Empirical evidence shows that wealthy households have substantially higher saving rates and markedly lower marginal propensity to consume (MPC) than other groups. Existing theory cannot account for this pattern unless under restrictive…
We study a practical optimization problems for venture capital investments and/or Research and Development (R&D) investments. The first problem is that, given the amount of the initial investment and the reward function at the initial…