Related papers: Risk- and ambiguity-averse portfolio optimization …
We aim to construct a general framework for portfolio management in continuous time, encompassing both stocks and bonds. In these lecture notes we give an overview of the state of the art of optimal bond portfolios and we re-visit main…
We study a goal-based portfolio selection problem in which an investor aims to meet multiple financial goals, each with a specific deadline and target amount. Trading the stock incurs a strictly positive transaction cost. Using the…
This paper considers the finite horizon portfolio rebalancing problem in terms of mean-variance optimization, where decisions are made based on current information on asset returns and transaction costs. The study's novelty is that the…
This paper discusses a nonlinear integral equation arising from portfolio selection with a class of time-inconsistent preferences. We propose a unified framework requiring minimal assumptions, such as right-continuity of market coefficients…
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…
We introduce a price impact model which accounts for finite market depth, tightness and resilience. Its coupled bid- and ask-price dynamics induce convex liquidity costs. We provide existence of an optimal solution to the classical problem…
How should financial institutions hedge their balance sheets against interest rate risk when managing long-term assets and liabilities? We address this question by proposing a bond portfolio solution based on ambiguity-averse preferences,…
We analyze an irreversible investment decision for a project which yields a flow of future operating profits given by a geometric Brownian motion with unknown drift. In contrast to similar optimal stopping problems with incomplete…
This paper considers utility indifference valuation of derivatives under model uncertainty and trading constraints, where the utility is formulated as an additive stochastic differential utility of both intertemporal consumption and…
A celebrated financial application of convex duality theory gives an explicit relation between the following two quantities: (i) The optimal terminal wealth $X^*(T) : = X_{\varphi^*}(T)$ of the problem to maximize the expected $U$-utility…
This article studies the sensitivity of the power utility maximization problem with respect to the investor's relative risk aversion, the statistical probability measure, the investment constraints and the market price of risk. We extend…
The paper studies problem of continuous time optimal portfolio selection for a incom- plete market diffusion model. It is shown that, under some mild conditions, near optimal strategies for investors with different performance criteria can…
We treat uncertain linear programming problems by utilizing the notion of weighted analytic centers and notions from the area of multi-criteria decision making. After introducing our approach, we develop interactive cutting-plane algorithms…
This paper studies stability of the exponential utility maximization when there are small variations on agent's utility function. Two settings are considered. First, in a general semimartingale model where random endowments are present, a…
This paper considers the constrained portfolio optimization in a generalized life-cycle model. The individual with a stochastic income manages a portfolio consisting of stocks, a bond, and life insurance to maximize his or her consumption…
When uncertainty is modelled by a set of non-dominated and non-compact probability measures, a notion of essential supremum for a family of real-valued functions is developed in terms of upper semi-analytic functions. We show how the…
This paper studies a sequential decision problem where payoff distributions are known and where the riskiness of payoffs matters. Equivalently, it studies sequential choice from a repeated set of independent lotteries. The decision-maker is…
We consider a continuous-time market with proportional transaction costs. Under appropriate assumptions we prove the existence of optimal strategies for investors who maximize their worst-case utility over a class of possible models. We…
We study a non-concave optimization problem in which a financial company maximizes the expected utility of the surplus under a risk-based regulatory constraint. For this problem, we consider four different prevalent risk constraints…
This paper studies a loss-averse version of the multiplicative habit formation preference and the corresponding optimal investment and consumption strategies over an infinite horizon. The agent's consumption preference is depicted by a…