Related papers: Investment under Duality Risk Measure
We consider an agent who has access to a financial market, including derivative contracts, who looks to maximise her utility. Whilst the agent looks to maximise utility over one probability measure, or class of probability measures, she…
We deal with the optimal execution problem when the broker's goal is to reach a performance barrier avoiding a downside barrier. The performance is provided by the wealth accumulated by trading in the market, the shares detained by the…
Managing a portfolio to a risk model can tilt the portfolio toward weaknesses of the model. As a result, the optimized portfolio acquires downside exposure to uncertainty in the model itself, what we call "second order risk." We propose a…
We provide an extension of the explicit solution of a mixed optimal stopping-optimal stochastic control problem introduced by Henderson and Hobson. The problem examines wether the optimal investment problem on a local martingale financial…
We consider the optimal investment and marginal utility pricing problem of a risk averse agent and quantify their exposure to a small amount of model uncertainty. Specifically, we compute explicitly the first-order sensitivity of their…
In risk-sharing markets with aggregate uncertainty, characterizing Pareto-optimal allocations when agents might not be risk averse is a challenging task, and the literature has only provided limited explicit results thus far. In particular,…
Bipartite matching, where agents on one side of a market are matched to agents or items on the other, is a classical problem in computer science and economics, with widespread application in healthcare, education, advertising, and general…
An unconventional approach for optimal stopping under model ambiguity is introduced. Besides ambiguity itself, we take into account how ambiguity-averse an agent is. This inclusion of ambiguity attitude, via an $\alpha$-maxmin nonlinear…
We study the range of prices at which a rational agent should contemplate transacting a financial contract outside a given securities market. Trading is subject to nonproportional transaction costs and portfolio constraints and full…
We study a notion of good-deal hedging, that corresponds to good-deal valuation for generalized good-deal constraints. Under model uncertainty about the market prices of risk of hedging assets, a robust approach leads to a reduction or even…
We consider an augmented version of Merton's portfolio choice problem, where trading by large investors influences the price of underlying financial asset leading to strategic interaction among investors, with investors deciding their…
We show that financial correlations exhibit a non-trivial dynamic behavior. We introduce a simple phenomenological model of a multi-asset financial market, which takes into account the impact of portfolio investment on price dynamics. This…
In a compound decision problem, consisting of $n$ statistically independent copies of the same problem to be solved under the sum of the individual losses, any reasonable compound decision rule $\delta$ satisfies a natural symmetry…
We develop a general theory of risk measures that determines the optimal amount of capital to raise and invest in a portfolio of reference traded securities in order to meet a pre-specified regulatory requirement. The distinguishing feature…
We construct a diffusion approximation of a repeated game in which agents make bets on outcomes of i.i.d. random vectors and their strategies are close to an asymptotically optimal strategy. This model can be interpreted as trading in an…
Foster and Hart proposed an operational measure of riskiness for discrete random variables. We show that their defining equation has no solution for many common continuous distributions including many uniform distributions, e.g. We show how…
When several two-sided matching markets merge into one, it is inevitable that some agents will become worse off if the matching mechanism used is stable. I formalize this observation by defining the property of integration monotonicity,…
This paper treats the Merton problem how to invest in safe assets and risky assets to maximize an investor's utility, given by investment opportunities modeled by a $d$-dimensional state process. The problem is represented by a partial…
We consider derivatives written on multiple underlyings in a one-period financial market, and we are interested in the computation of model-free upper and lower bounds for their arbitrage-free prices. We work in a completely realistic…
We consider the optimal investment problem when the traded asset may default, causing a jump in its price. For an investor with constant absolute risk aversion, we compute indifference prices for defaultable bonds, as well as a price for…