Related papers: Real Options and Threshold Strategies
We consider a class of closed loop stochastic optimal control problems in finite time horizon, in which the cost is an expectation conditional on the event that the process has not exited a given bounded domain. An important difficulty is…
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…
We consider a finite horizon optimal stopping problem related to trade-off strategies between expected profit and cost cash-flows of an investment under uncertainty. The optimal problem is first formulated in terms of a system of Snell…
In this paper we study a utility maximization problem with both optimal control and optimal stopping in a finite time horizon. The value function can be characterized by a variational equation that involves a free boundary problem of a…
We address the problem of portfolio optimization under the simplest coherent risk measure, i.e. the expected shortfall. As it is well known, one can map this problem into a linear programming setting. For some values of the external…
We introduce a notion of bounded variation solution for a new class of nonlinear control systems with ordinary and impulsive controls, in which the drift function depends not only on the state, but also on its past history, through a finite…
We study the optimal placement problem of a stock trader who wishes to clear his/her inventory by a predetermined time horizon t, by using a limit order or a market order. For a diffusive market, we characterize the optimal limit order…
Motivated by the industry practice of pairs trading, we study the optimal timing strategies for trading a mean-reverting price spread. An optimal double stopping problem is formulated to analyze the timing to start and subsequently…
We present a new approach for studying the problem of optimal hedging of a European option in a finite and complete discrete-time market model. We consider partial hedging strategies that maximize the success probability or minimize the…
Long term optimal investment problems are studied in a factor model with matrix valued state variables. Explicit parameter restrictions are obtained under which, for an isoelastic investor, the finite horizon value function and optimal…
This paper is concerned with a time-inconsistent recursive stochastic control problems where the forward state process is constrained through an additional recursive utility system. By adapting the Ekeland variational principle, necessary…
In this study, we have developed a dynamic asset allocation investment strategy using reinforcement learning techniques. To begin with, we have addressed the crucial issue of incorporating non-stationarity of financial time series data into…
I consider the problem of the optimal limit order price of a financial asset in the framework of the maximization of the utility function of the investor. The analytical solution of the problem gives insight on the origin of the recently…
This paper develops a method to derive optimal portfolios and risk premia explicitly in a general diffusion model for an investor with power utility and a long horizon. The market has several risky assets and is potentially incomplete.…
We study several optimal stopping problems that arise from trading a mean-reverting price spread over a finite horizon. Modeling the spread by the Ornstein-Uhlenbeck process, we analyze three different trading strategies: (i) the long-short…
In this paper, a sub-optimal boundary control strategy for a free boundary problem is investigated. The model is described by a non-smooth convection-diffusion equation. The control problem is addressed by an instantaneous strategy based on…
In this paper we study the existence of an optimal hedging strategy for the shortfall risk measure in the game options setup. We consider the continuous time Black--Scholes (BS) model. Our first result says that in the case where the game…
This paper considers the optimal dividend payment problem in piecewise-deterministic compound Poisson risk models. The objective is to maximize the expected discounted dividend payout up to the time of ruin. We provide a comparative study…
An unconventional approach for optimal stopping under model ambiguity is introduced. Besides ambiguity itself, we take into account how ambiguity-averse an agent is. This inclusion of ambiguity attitude, via an $\alpha$-maxmin nonlinear…
We study a goal-based portfolio selection problem in which an investor aims to meet multiple financial goals, each with a specific deadline and target amount. Trading the stock incurs a strictly positive transaction cost. Using the…