Related papers: Optimal risk allocation in a market with non-conve…
In this paper, we revisit the portfolio allocation problem with designated risk-budget [Qian, 2005]. We generalize the problem of arbitrary risk budgets with unequal correlations to one that includes return forecasts and transaction costs…
This paper presents an optimal allocation problem in a financial market with one risk-free and one risky asset, when the market is driven by a stochastic market price of risk. We solve the problem in continuous time, for an investor with a…
This paper studies dynamic asset allocation with interest rate risk and several sources of ambiguity. The market consists of a risk-free asset, a zero-coupon bond (both determined by a Vasicek model), and a stock. There is ambiguity about…
This paper investigates risk measures derived from the expected maximum deficit in a continuous-time framework and develops optimal reserve allocation strategies across multiple lines of business. We formalize the expected maximum deficit…
I characterize optimal government policy in a sticky-price economy with different types of consumers and endogenous financial constraints in the banking and entrepreneurial sectors. The competitive equilibrium allocation is constrained…
We consider a collection of derivatives that depend on the price of an underlying asset at expiration or maturity. The absence of arbitrage is equivalent to the existence of a risk-neutral probability distribution on the price; in…
In incomplete financial markets not every contingent claim can be replicated by a self-financing strategy. The risk of the resulting shortfall can be measured by convex risk measures, recently introduced by F\"ollmer, Schied (2002). The…
In economic analysis, rational decision-makers often take actions to reduce their risk exposure. These actions include purchasing market insurance and implementing prevention measures to modify the shape of the loss distribution. Under the…
In this paper, we discuss the ambiguous chance constrained based portfolio optimization problems, in which the perturbations associated with the input parameters are stochastic in nature, but their distributions are not known precisely. We…
Risk measures for multivariate financial positions are studied in a utility-based framework. Under a certain incomplete preference relation, shortfall and divergence risk measures are defined as the optimal values of specific set…
The aim of this work consists in the study of the optimal investment strategy for a behavioural investor, whose preference towards risk is described by both a probability distortion and an S-shaped utility function. Within a continuous-time…
In this paper, we study two classes of optimal reinsurance models from perspectives of both insurers and reinsurers by minimizing their convex combination where the risk is measured by a distortion risk measure and the premium is given by a…
Uncertainty is prevalent in engineering design, data-driven problems, and decision making broadly. Due to inherent risk-averseness and ambiguity about assumptions, it is common to address uncertainty by formulating and solving conservative…
We develop a rigorous framework for global non-convex optimization by reformulating the minimization problem as a discounted infinite-horizon optimal control problem. For non-convex, continuous, and possibly non-smooth objective functions…
This paper studies convex duality in optimal investment and contingent claim valuation in markets where traded assets may be subject to nonlinear trading costs and portfolio constraints. Under fairly general conditions, the dual expressions…
This paper studies robust forward investment and consumption preferences and optimal strategies for a risk-averse and ambiguity-averse agent in an incomplete financial market with drift and volatility uncertainties. We focus on non-zero…
This paper proves, in very general settings, that convex risk minimization is a procedure to select a unique conditional probability model determined by the classification problem. Unlike most previous work, we give results that are general…
Optimal reinsurance when Value at Risk and expected surplus is balanced through their ratio is studied, and it is demonstrated how results for risk-adjusted surplus can be utilized. Simplifications for large portfolios are derived, and this…
We investigate an optimal investment problem with a general performance criterion which, in particular, includes discontinuous functions. Prices are modeled as diffusions and the market is incomplete. We find an explicit solution for the…
We treat a discrete-time asset allocation problem in an arbitrage-free, generically incomplete financial market, where the investor has a possibly non-concave utility function and wealth is restricted to remain non-negative. Under easily…