Related papers: Portfolio Selection with Mandatory Bequest
We introduce an extension to Merton's famous continuous time model of optimal consumption and investment, in the spirit of previous works by Pliska and Ye, to allow for a wage earner to have a random lifetime and to use a portion of the…
This paper studies optimal liquidity provision for perpetual contracts when the funding rate is a stochastic state variable. The core extension to classical market making is the coupling between inventory and funding payments: inventory…
This paper addresses a novel \emph{cost-sensitive} distributionally robust log-optimal portfolio problem, where the investor faces \emph{ambiguous} return distributions, and a general convex transaction cost model is incorporated. The…
We determine how an individual can use life insurance to meet a bequest goal. We assume that the individual's consumption is met by an income, such as a pension, life annuity, or Social Security. Then, we consider the wealth that the…
In this paper, we consider a financial market with assets exposed to some risks inducing jumps in the asset prices, and which can still be traded after default times. We use a default-intensity modeling approach, and address in this…
We consider the multi-period portfolio optimization problem with a single asset that can be held long or short. Due to the presence of transaction costs, maximizing the immediate reward at each period may prove detrimental, as frequent…
Management of the portfolios containing low liquidity assets is a tedious problem. The buyer proposes the price that can differ greatly from the paper value estimated by the seller, the seller, on the other hand, can not liquidate his…
This paper studies the optimal investment problem with random endowment in an inventory-based price impact model with competitive market makers. Our goal is to analyze how price impact affects optimal policies, as well as both pricing rules…
We investigate how and when to diversify capital over assets, i.e., the portfolio selection problem, from a signal processing perspective. To this end, we first construct portfolios that achieve the optimal expected growth in i.i.d.…
By employing the technique of enlargement of filtrations, we demonstrate how to incorporate information about the future trend of the stochastic interest rate process into a financial model. By modeling the interest rate as an affine…
We expose a simple solution of the consumption-investment problem pair trading. The proof is based on the remark that the HJB equation can be reduced to a linear parabolic equation solvable explicitly.
We consider the robust exponential utility maximization problem in discrete time: An investor maximizes the worst case expected exponential utility with respect to a family of nondominated probabilistic models of her endowment by…
We present a theorem for verification of optimality of controlled diffusions under the average cost criterion with near-monotone running cost, without invoking any blanket stability assumptions. The implications of this result to the policy…
Motivated by the current global high inflation scenario, we aim to discover a dynamic multi-period allocation strategy to optimally outperform a passive benchmark while adhering to a bounded leverage limit. To this end, we formulate an…
The paper provides a mathematical model and a tool for the focused investing strategy as advocated by Buffett, Munger, and others from this investment community. The approach presented here assumes that the investor's role is to think about…
We discuss an optimal investment, consumption and insurance problem of a wage earner under inflation. Assume a wage earner investing in a real money account and three asset prices, namely: a real zero coupon bond, the inflation-linked real…
In this paper, we study closed-loop equilibrium strategies for mean-variance portfolio selection problem in a hidden Markov model with dynamic attention behavior. In addition to the investment strategy, the investor's attention to news is…
We consider a financial market with a stock exposed to a counterparty risk inducing a drop in the price, and which can still be traded after this default time. We use a default-density modeling approach, and address in this incomplete…
Rough stochastic volatility models have attracted a lot of attentions recently, in particular for the linear option pricing problem. In this paper, starting with power utilities, we propose to use a martingale distortion representation of…
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…