Related papers: Investment under Duality Risk Measure
This paper studies the optimal consumption under the addictive habit formation preference in markets with transaction costs and unbounded random endowments. To model the proportional transaction costs, we adopt the Kabanov's multi-asset…
Gambles are random variables that model possible changes in monetary wealth. Classic decision theory transforms money into utility through a utility function and defines the value of a gamble as the expectation value of utility changes.…
We study a dynamic asset pricing problem in which a representative agent is ambiguous about the aggregate endowment growth rate and trades a risky stock, human capital, and a risk-free asset to maximize her preference value of consumption…
This paper revisits the classical Merton portfolio choice problem over infinite horizon for high risk aversion, addressing technical challenges related to establishing the existence and identification of optimal strategies. Traditional…
We propose an approach to the aggregation of risks which is based on estimation of simple quantities (such as covariances) associated to a vector of dependent random variables, and which avoids the use of parametric families of copulae. Our…
This paper concerns the numerical solution of a fully nonlinear parabolic double obstacle problem arising from a finite portfolio selection with proportional transaction costs. We consider the optimal allocation of wealth among multiple…
It has been assumed that arbitrage profits are not possible in efficient markets, because future prices are not predictable. Here we show that predictability alone is not a sufficient measure of market efficiency. We instead propose to…
We study arbitrage opportunities, market viability and utility maximization in market models with an insider. Assuming that an economic agent possesses from the beginning an additional information in the form of a random variable G, which…
In this work we analytically solve an optimal retirement problem, in which the agent optimally allocates the risky investment, consumption and leisure rate to maximise a gain function characterised by a power utility function of consumption…
With model uncertainty characterized by a convex, possibly non-dominated set of probability measures, the agent minimizes the cost of hedging a path dependent contingent claim with given expected success ratio, in a discrete-time,…
We study a portfolio optimization problem for competitive agents with CRRA utilities and a common finite time horizon. The utility of an agent depends not only on her absolute wealth and consumption but also on her relative wealth and…
I study the limit of a large random economy, where a set of consumers invests in financial instruments engineered by banks, in order to optimize their future consumption. This exercise shows that, even in the ideal case of perfect…
Excessive leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be…
Artificial intelligence-based systems for player risk detection have become central to harm prevention efforts in the gambling industry. However, growing concerns around transparency and effectiveness have highlighted the absence of…
In this article we consider a special case of an optimal consumption/optimal portfolio problem first studied by Constantinides and Magill and by Davis and Norman, in which an agent with constant relative risk aversion seeks to maximise…
We study the optimal investment problem for a continuous time incomplete market model such that the risk-free rate, the appreciation rates and the volatility of the stocks are all random; they are assumed to be independent from the driving…
We provide easily verifiable conditions for the well-posedness of the optimal investment problem for a behavioral investor in an incomplete discrete-time multiperiod financial market model, for the first time in the literature. Under two…
We construct several definitions of imbalance and playability, both of which are related to the existence of dominated strategies. Specifically, a maximally balanced game and a playable game cannot have dominated strategies for any player.…
This study investigates an optimal consumption--investment problem in which the unobserved stock trend is modulated by a hidden Markov chain that represents different economic regimes. In the classical approach, the hidden state is…
This paper studies a risk-sensitive decision-making problem under uncertainty. It considers a decision-making process that unfolds over a fixed number of stages, in which a decision-maker chooses among multiple alternatives, some of which…