Related papers: Realization Utility with Reference-Dependent Prefe…
We consider a risk-sensitive optimization of consumption-utility on infinite time horizon where the one-period investment gain depends on an underlying economic state whose evolution over time is assumed to be described by a discrete-time,…
We propose a tensor-based model that fuses a more granular representation of user preferences with the ability to take additional side information into account. The model relies on the concept of ordinal nature of utility, which better…
In this paper we extend Savage's theory of decision-making under uncertainty from a classical environment into a non-classical one. We formulate the corresponding axioms and provide representation theorems for qualitative measures and…
We study an optimal investment/consumption problem in a model capturing market and credit risk dependencies. Stochastic factors drive both the default intensity and the volatility of the stocks in the portfolio. We use the martingale…
This paper proposes an expected multivariate utility analysis for ESG investors in which green stocks, brown stocks, and a market index are modeled in a one-factor, CAPM-type structure. This setting allows investors to accommodate their…
Tackling the problem of ordinal preference revelation and reasoning, we propose a novel methodology for generating an ordinal utility function from a set of qualitative preference statements. To the best of our knowledge, our proposal…
This work models the interconnection of company's investment managers' representations and the market attraction of its shares. The models that reflect the connection of the company's market effectiveness indices and parameters of its…
The random utility model (RUM, McFadden and Richter, 1990) has been the standard tool to describe the behavior of a population of decision makers. RUM assumes that decision makers behave as if they maximize a rational preference over a…
This paper studies preference aggregation under risk. In our model, each agent has an incomplete preference relation represented by a set of expected utility functions. The classical Pareto principle is silent on agreement involving…
Betting markets are gaining in popularity. Mean beliefs generally differ from prices in prediction markets. Logarithmic utility is employed to study the risk and return adjustments to prices. Some consequences are described. A modified…
We apply a utility-based method to obtain the value of a finite-time investment opportunity when the underlying real asset is not perfectly correlated to a traded financial asset. Using a discrete-time algorithm to calculate the…
We consider a popular model of microeconomics with countably many assets: the Arbitrage Pricing Model. We study the problem of optimal investment under an expected utility criterion and look for conditions ensuring the existence of optimal…
Decisions under uncertainty or with multiple objectives usually require the decision maker to formulate a preference regarding risks or trade-offs. If this preference is known, the ordered weighted averaging (OWA) criterion can be applied…
Representation learning constructs low-dimensional representations to summarize essential features of high-dimensional data. This learning problem is often approached by describing various desiderata associated with learned representations;…
This study develops an inverse portfolio optimization framework for recovering latent investor preferences including risk aversion, transaction cost sensitivity, and ESG orientation from observed portfolio allocations. Using controlled…
We consider an investor who, while maximizing his/her expected utility, also compares the outcome to a reference entity. We recall the notion of personal equilibrium and show that, in a multistep, generically incomplete financial market…
We investigate the dynamic stability of the indirect utility process associated with a (possibly suboptimal) trading strategy under perturbations of the market. Establishing the reverse conjugacy characterizations first, we prove continuity…
We demonstrate a limitation of discounted expected utility, a standard approach for representing the preference to risk when future cost is discounted. Specifically, we provide an example of the preference of a decision maker that appears…
Snapshots of "best" (or "worst") experience are known to dominate human memory and may thus also have a significant effect on future behaviour. We consider here a model of repeated decision-making where, at every time step, an agent takes…
In this article we consider an optimization problem of expected utility maximization of continuous-time trading in a financial market. This trading is constrained by a benchmark for a utility-based shortfall risk measure. The market…