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We present a formal model for studying fashion trends, in terms of three parameters of fashionable items: (1) their innate utility; (2) individual boredom associated with repeated usage of an item; and (3) social influences associated with…
We consider optimal consumption and portfolio choice in the presence of Knightian uncertainty in continuous-time. We embed the problem into the new framework of stochastic calculus for such settings, dealing in particular with the issue of…
We investigate optimal consumption policies in the liquidity risk model introduced in Pham and Tankov (2007). Our main result is to derive smoothness results for the value functions of the portfolio/consumption choice problem. As an…
This paper extends the results of the article [C. Kl\"{u}ppelberg and S. M. Pergamenchtchikov. Optimal consumption and investment with bounded downside risk for power utility functions. In Optimality and Risk: {\it Modern Trends in…
We study investment strategy in different models of financial markets, where the investors cannot reach a perfect knowledge about available assets. The investor spends a certain effort to get information; this allows him to better choose…
This paper studies a continuous-time optimal portfolio selection problem in the complete market for a behavioral investor whose preference is of the prospect type with probability distortion. The investor concerns about the terminal…
A problem of optimal debt management is modeled as a noncooperative game between a borrower and a pool of lenders, in infinite time horizon with exponential discount. The yearly income of the borrower is governed by a stochastic process.…
A speculative agent with Prospect Theory preference chooses the optimal time to purchase and then to sell an indivisible risky asset to maximize the expected utility of the round-trip profit net of transaction costs. The optimization…
A theoretical method is empirically illustrated in finding the best time to forsake a loan such that the overall credit loss is minimised. This is predicated by forecasting the future cash flows of a loan portfolio up to the contractual…
This paper concerns the numerical solution of a fully nonlinear parabolic double obstacle problem arising from a finite portfolio selection with proportional transaction costs. We consider the optimal allocation of wealth among multiple…
We introduce a highly stylized, yet non trivial model of the economy, with a public and private sector coupled through a wealth tax and a redistribution policy. The model can be fully solved analytically, and allows one to address the…
In stochastic finance, one traditionally considers the return as a competitive measure of an asset, {\it i.e.}, the profit generated by that asset after some fixed time span $\Delta t$, say one week or one year. This measures how well (or…
The focal point of this paper is the so-called Kelly Criterion, a prescription for optimal resource allocation among a set of gambles which are repeated over time. The criterion calls for maximization of the expected value of the…
We study perpetual American option pricing problems in an extension of the Black-Merton-Scholes model in which the dividend and volatility rates of the underlying risky asset depend on the running values of its maximum and maximum drawdown.…
We study the optimal investment policy of a firm facing both technological and cash-flow uncertainty. At any point in time, the firm can decide to invest in a standalone technology or to wait for a technological breakthrough. Breakthroughs…
This paper studies a type of consumption preference where some adjustment costs are incured whenever the past spending maximum and the past spending minimum records are updated. This preference can capture the adverse effects of the…
In a discrete-time financial market model with instantaneous price impact, we find an asymptotically optimal strategy for an investor maximizing her expected wealth. The asset price is assumed to follow a process with negative memory. We…
This article is the term paper of the course Investments. We mainly focus on modeling long-term investment decisions of a typical utility-maximizing individual, with features of Chinese stock market in perspective. We adopt an OR based…
We consider a continuous-time game-theoretic model of an investment market with short-lived assets and endogenous asset prices. The first goal of the paper is to formulate a stochastic equation which determines wealth processes of investors…
This paper studies the topic of cost-efficiency in incomplete markets. A payoff is called cost-efficient if it achieves a given probability distribution at some given investment horizon with a minimum initial budget. Extensive literature…