Related papers: Minimizing the Expected Lifetime Spent in Drawdown…
We consider an insurance company whose surplus is represented by the classical Cramer-Lundberg process. The company can invest its surplus in a risk free asset and in a risky asset, governed by the Black-Scholes equation. There is a…
This paper presents a derivation of the explicit price for the perpetual American put option in the Black-Scholes model, time-capped by the first drawdown epoch beyond a predefined level. We demonstrate that the optimal exercise strategy…
This paper studies the optimal consumption under the addictive habit formation preference in markets with transaction costs and unbounded random endowments. To model the proportional transaction costs, we adopt the Kabanov's multi-asset…
This paper studies an optimal consumption-investment problem for an investor whose instantaneous utility depends on both consumption and wealth, and the investor faces a general borrowing constraint that the investment amount in the risky…
This paper studies optimal consumption and saving decisions under uncertainty about the transition dynamics of the economic environment. We consider a general optimal savings problem in which the exogenous state governing discounting,…
Control of drawdown, that is, the control of the drops in wealth over time from peaks to subsequent lows, is of great concern from a risk management perspective. With this motivation in mind, the focal point of this paper is to address the…
We consider risk averse investors with different levels of anxiety about asset price drawdowns. The latter is defined as the distance of the current price away from its best performance since inception. These drawdowns can increase either…
We consider an optimal consumption/investment problem to maximize expected utility from consumption. In this market model, the investor is allowed to choose a portfolio which consists of one bond, one liquid risky asset (no transaction…
In this paper,we study the individual's optimal retirement time and optimal consumption under habitual persistence. Because the individual feels equally satisfied with a lower habitual level and is more reluctant to change the habitual…
We explore the implications of a preference ordering for an investor-consumer with a strong preference for keeping consumption above an exogenous social norm, but who is willing to tolerate occasional dips below it. We do this by splicing…
In this paper, we investigate an optimal investment and consumption problem for an investor who trades in a Black--Scholes financial market with stochastic coefficients driven by a non-Gaussian Ornstein--Uhlenbeck process. We assume that an…
Stop-loss rules are often studied in the financial literature, but the stop-loss levels are seldom constructed systematically. In many papers, and indeed in practice as well, the level of the stops is too often set arbitrarily. Guided by…
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…
The paper investigates the consumption-investment problem for an investor with Epstein-Zin utility in an incomplete market. Closed, not necessarily convex, constraints are imposed on strategies. The optimal consumption and investment…
The main objective of this paper is to develop a martingale-type solution to optimal consumption--investment choice problems ([Merton, 1969] and [Merton, 1971]) under time-varying incomplete preferences driven by externalities such as…
The classical optimal investment and consumption problem with infinite horizon is studied in the presence of transaction costs. Both proportional and fixed costs as well as general utility functions are considered. Weak dynamic programming…
This paper considers an optimal life insurance for a householder subject to mortality risk. The household receives a wage income continuously, which is terminated by unexpected (premature) loss of earning power or (planned and intended)…
In life-cycle economics the Samuelson paradigm (Samuelson, 1969) states that the optimal investment is in constant proportions out of lifetime wealth composed of current savings and the present value of future income. It is well known that…
This paper studies an optimal investing problem for a retiree facing longevity risk and living standard risk. We formulate the investing problem as a portfolio choice problem under a time-varying risk capacity constraint. We derive the…
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.…