Related papers: Analytical solution to an investment problem under…
In this paper we propose a new way of proving the value of a firm that is currently producing a certain product and faces the option to exit the market. The problem of optimal exiting is an optimal stopping problem, that can be solved using…
We investigate optimal consumption problems for a Black-Scholes market under uniform restrictions on Value-at-Risk and Expected Shortfall for logarithmic utility functions. We find the solutions in terms of a dynamic strategy in explicit…
Volatility measures the amplitude of price fluctuations. Despite it is one of the most important quantities in finance, volatility is not directly observable. Here we apply a maximum likelihood method which assumes that price and volatility…
This paper solves a Bayes sequential impulse control problem for a diffusion, whose drift has an unobservable parameter with a change point. The partially-observed problem is reformulated into one with full observations, via a change of…
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…
We study a robust utility maximization problem in the unbounded case with a general penalty term and information including jumps. We focus on time consistent penalties and we prove that there exists an optimal probability measure solution…
Stochastic optimal control problems have a long tradition in applied probability, with the questions addressed being of high relevance in a multitude of fields. Even though theoretical solutions are well understood in many scenarios, their…
We consider a dynamic portfolio optimization problem that incorporates predictable returns, instantaneous transaction costs, price impact, and stochastic volatility, extending the classical results of Garleanu and Pedersen (2013), which…
We consider a portfolio optimization problem in a defaultable market with finitely-many economical regimes, where the investor can dynamically allocate her wealth among a defaultable bond, a stock, and a money market account. The market…
We study a robust utility maximization problem in the case of an incomplete market and logarithmic utility with general stochastic constraints, not necessarily convex. Our problem is equivalent to maximizing of nonlinear expected…
We propose solution of the problem of the mean square optimal estimation of linear functionals which depend on the unobserved values of a continuous time stochastic process with periodically correlated increments based on observations of…
Drifts of asset returns are notoriously difficult to model accurately and, yet, trading strategies obtained from portfolio optimization are very sensitive to them. To mitigate this well-known phenomenon we study robust growth-optimization…
Throughout this paper, we focused our aim on the problem of optimal control under a risk-sensitive performance functional, where the system is given by a fully coupled forward-backward stochastic differential equation with jump. The risk…
We model the joint distribution of choice probabilities and decision times in binary choice tasks as the solution to a problem of optimal sequential sampling, where the agent is uncertain of the utility of each action and pays a constant…
In this paper, we consider the portfolio optimization problem in a financial market under a general utility function. Empirical results suggest that if a significant market fluctuation occurs, invested wealth tends to have a notable change…
In this note we consider the maximization of the expected terminal wealth for the setup of quadratic transaction costs. First, we provide a very simple probabilistic solution to the problem. Although the problem was largely studied, as far…
This paper deals with numerical solutions of maximizing expected utility from terminal wealth under a non-bankruptcy constraint. The wealth process is subject to shocks produced by a general marked point process. The problem of the agent is…
We study the optimal liquidation problem in a market model where the bid price follows a geometric pure jump process whose local characteristics are driven by an unobservable finite-state Markov chain and by the liquidation rate. This model…
In an incomplete continuous-time securities market with uncertainty generated by Brownian motions, we derive closed-form solutions for the equilibrium interest rate and market price of risk processes. The economy has a finite number of…
We investigate the optimal investment-reinsurance problem for insurance company with partial information on the market price of the risk. Through the use of filtering techniques we convert the original optimization problem involving…