Related papers: Rebalancing with Linear and Quadratic Costs
We employ perturbation analysis technique to study multi-asset portfolio optimisation with transaction cost. We allow for correlations in risky assets and obtain optimal trading methods for general utility functions. Our analytical results…
This paper is concerned with an optimal investment problem under correlated noises in the financial market, and the expected utility functional is hyperbolic absolute risk aversion (HARA) with the exponent $\gamma\neq0$. The problem can be…
This paper explores the optimal investment problem of a renewal risk model with generalized Erlang distributed interarrival times. The phases of the Erlang interarrival time is assumed to be observable. The price of the risky asset is…
We consider a stochastic model of investment on an asset of a stock market for a prudent investor. She decides to buy permanent goods with a fraction $\a$ of the maximum amount of money owned in her life in order that her economic level…
Motivated by the emergence of popular service-based two-sided markets where sellers can serve multiple buyers at the same time, we formulate and study the {\em two-sided cost sharing} problem. In two-sided cost sharing, sellers incur…
We combine forward investment performance processes and ambiguity averse portfolio selection. We introduce the notion of robust forward criteria which addresses the issues of ambiguity in model specification and in preferences and…
We consider the problem of the optimal trading strategy in the presence of a price predictor, linear trading costs and a quadratic risk control. The solution is known to be a band system, a policy that induces a no-trading zone in the…
We introduce a strategic behavior in reinsurance bilateral transactions, where agents choose the risk preferences they will appear to have in the transaction. Within a wide class of risk measures, we identify agents' strategic choices to a…
This paper develops a dynamic equilibrium model of the insurance market that jointly characterizes insurers' underwriting, investment, recapitalization, and dividend policies under model uncertainty and financial frictions. Competitive…
We find the minimum probability of lifetime ruin of an investor who can invest in a market with a risky and a riskless asset and who can purchase a reversible life annuity. The surrender charge of a life annuity is a proportion of its…
A new methodology has been introduced to clean the correlation matrix of single stocks returns based on a constrained principal component analysis using financial data. Portfolios were introduced, namely "Fundamental Maximum Variance…
This paper is concerned with the uniqueness issue of open-loop equilibrium investment strategies of dynamic mean-variance portfolio selection problems with random coefficients. A unified method is developed to treat both the problems with…
Explicit robust hedging strategies for convex or concave payoffs under a continuous semimartingale model with uncertainty and small transaction costs are constructed. In an asymptotic sense, the upper and lower bounds of the cumulative…
This paper investigates market-consistent valuation of insurance liabilities in the context of, for instance, Solvency II and to some extent IFRS 4. We propose an explicit and consistent framework for the valuation of insurance liabilities…
We model the impact costs of a strategy that trades a basket of correlated instruments, by extending to the multivariate case the linear propagator model previously used for single instruments. Our specification allows us to calibrate a…
We study Pareto-optimal risk sharing in economies with heterogeneous attitudes toward risk, where agents' preferences are modeled by distortion risk measures. Building on comonotonic and counter-monotonic improvement results, we show that…
In this paper, we assume an insure is allowed to purchase proportional reinsurance and can invest his or her wealth into the financial market where a savings account, stocks and bonds are available. Different from classical optimal…
We investigate the optimal investment-reinsurance problem for insurance company with partial information on the market price of the risk. Through the use of filtering techniques we convert the original optimization problem involving…
We consider a discrete-time model of a financial market where a risky asset is bought and sold with transactions having a transient price impact. It is shown that the corresponding utility maximization problem admits a solution. We manage…
In general, underestimation of risk is something which should be avoided as far as possible. Especially in financial asset management, equity risk is typically characterized by the measure of portfolio variance, or indirectly by quantities…