Related papers: An explicit solution for optimal investment proble…
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…
The question addressed in this paper is the performance of the optimal strategy, and the impact of partial information. The setting we consider is that of a stochastic asset price model where the trend follows an unobservable…
We investigate a continuous-time investment-consumption problem with model uncertainty in a general diffusion-based market with random model coefficients. We assume that a power utility investor is ambiguity-averse, with the preference to…
We study optimal investment problems under the framework of cumulative prospect theory (CPT). A CPT investor makes investment decisions in a single-period financial market with transaction costs. The objective is to seek the optimal…
We pursue an inverse approach to utility theory and consumption & investment problems. Instead of specifying an agent's utility function and deriving her actions, we assume we observe her actions (i.e. her consumption and investment…
We study the Merton portfolio management problem within a complete market, non constant time discount rate and general utility framework. The non constant discount rate introduces time inconsistency which can be solved by introducing sub…
This paper introduces a dual problem to study a continuous-time consumption and investment problem with incomplete markets and stochastic differential utility. For Epstein-Zin utility, duality between the primal and dual problems is…
We study a single risky financial asset model subject to price impact and transaction cost over an infinite horizon. An investor needs to execute a long position in the asset affecting the price of the asset and possibly incurring in fixed…
We give explicit solutions for utility maximization of terminal wealth problem $u(X_T)$ in the presence of Knightian uncertainty in continuous time $[0,T]$ in a complete market. We assume there is uncertainty on both drift and volatility of…
We study the portfolio selection problem of a long-run investor who is maximising the asymptotic growth rate of her expected utility. We show that, somewhat surprisingly, it is essentially not affected by introduction of a floor constraint…
In this paper, asymptotic results in a long-term growth rate portfolio optimization model under both fixed and proportional transaction costs are obtained. More precisely, the convergence of the model when the fixed costs tend to zero is…
We consider an optimal investment-consumption problem for a utility-maximizing investor who has access to assets with different liquidity and whose consumption rate as well as terminal wealth are subject to lower-bound constraints. Assuming…
This paper studies some unconventional utility maximization problems when the ratio type relative portfolio performance is periodically evaluated over an infinite horizon. Meanwhile, the agent is prohibited from short-selling stocks. Our…
We study optimal portfolio choice under Epstein-Zin recursive utility in the presence of general leverage constraints. We first establish that the optimal value function is the unique viscosity solution to the associated…
We derive the optimal investment decision in a project where both demand and investment costs are stochastic processes, eventually subject to shocks. We extend the approach used in Dixit and Pindyck (1994), chapter 6.5, to deal with two…
We consider a generalization of the recursive utility model by adding a new component that represents utility of investment gains and losses. We also study the utility process in this generalized model with constant elasticity of…
We study an optimal liquidation problem with multiplicative price impact in which the trend of the asset's price is an unobservable Bernoulli random variable. The investor aims at selling over an infinite time-horizon a fixed amount of…
We consider a retailer who buys energy in the wholesale market and resells it to final consumers. The retailer has to decide when to intervene to change the price he asks to his customers, in order to maximize his income. We model the…
We consider the problem of optimizing the expected logarithmic utility of the value of a portfolio in a binomial model with proportional transaction costs with a long time horizon. By duality methods, we can find expressions for the…
The existence of optimal strategy in robust utility maximization is addressed when the utility function is finite on the entire real line. A delicate problem in this case is to find a "good definition" of admissible strategies, so that an…