Related papers: Real Options and Threshold Strategies
This paper studies the problem of optimal investment with CRRA (constant, relative risk aversion) preferences, subject to dynamic risk constraints on trading strategies. The market model considered is continuous in time and incomplete. the…
We study the valuation of an American put option with a random time horizon given by the last exit time of the underlying asset from a fixed level. Since this random time is not a stopping time, the problem falls outside the classical…
In this paper we consider multiple constrained resource allocation problems, where the constraints can be specified by formulating activity dependency restrictions or by using game-theoretic models. All the problems are focused on generic…
We study the optimal order placement strategy with the presence of a liquidity cost. In this problem, a stock trader wishes to clear her large inventory by a predetermined time horizon $T$. A trader uses both limit and market orders, and a…
In this article we study an optimal stopping/optimal control problem which models the decision facing a risk-averse agent over when to sell an asset. The market is incomplete so that the asset exposure cannot be hedged. In addition to the…
We investigate the growth optimal strategy over a finite time horizon for a stock and bond portfolio in an analytically solvable multiplicative Markovian market model. We show that the optimal strategy consists in holding the amount of…
We apply a utility-based method to obtain the value of a finite-time investment opportunity when the underlying real asset is not perfectly correlated to a traded financial asset. Using a discrete-time algorithm to calculate the…
This paper studies the timing of trades under mean-reverting price dynamics subject to fixed transaction costs. We solve an optimal double stopping problem to determine the optimal times to enter and subsequently exit the market, when…
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…
Decision-changing imitation is a prevalent phenomenon in financial markets, where investors imitate others' decision-changing rates when making their own investment decisions. In this work, we study the optimal investment problem under the…
We study a practical optimization problems for venture capital investments and/or Research and Development (R&D) investments. The first problem is that, given the amount of the initial investment and the reward function at the initial…
The problem of stock hedging is reconsidered in this paper, where a put option is chosen from a set of available put options to hedge the market risk of a stock. A formula is proposed to determine the probability that the potential loss…
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…
In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the…
This paper considers the portfolio management problem of optimal investment, consumption and life insurance. We are concerned with time inconsistency of optimal strategies. Natural assumptions, like different discount rates for consumption…
We consider a simple optimal probabilistic problem solving strategy that searches through potential solution candidates in a specific order. We are interested in what impact has interchanging the order of two solution candidates with…
Pricing financial or real options with arbitrary payoffs in regime-switching models is an important problem in finance. Mathematically, it is to solve, under certain standard assumptions, a general form of optimal stopping problems in…
A widely used technique for improving policies is success conditioning, in which one collects trajectories, identifies those that achieve a desired outcome, and updates the policy to imitate the actions taken along successful trajectories.…
We study optimal investment in a financial market having a finite number of assets from a signal processing perspective. We investigate how an investor should distribute capital over these assets and when he should reallocate the…
We consider the dividend maximization problem including a ruin penalty in a diffusion environment. The additional penalty term is motivated by a constraint on dividend strategies. Intentionally, we use different discount rates for the…