Related papers: Robust Optimization of Credit Portfolios
This paper investigates a robust optimal consumption, investment, and reinsurance problem for an insurer with Epstein-Zin recursive preferences operating under model uncertainty. The insurer's surplus follows the diffusion approximation of…
This study employs expected certainty equivalents to explore the reinsurance and investment issue pertaining to an insurer that aims to maximize the expected utility while being subject to random risk aversion. The insurer's surplus process…
The present paper addresses the issue of the stochastic control of the optimal dynamic reinsurance policy and dynamic dividend strategy, which are state-dependent, for an insurance company that operates under multiple insurance lines of…
We consider an investor facing a classical portfolio problem of optimal investment in a log-Brownian stock and a fixed-interest bond, but constrained to choose portfolio and consumption strategies that reduce a dynamic shortfall risk…
Integer variables allow the treatment of some portfolio optimization problems in a more realistic way and introduce the possibility of adding some natural features to the model. We propose an algebraic approach to maximize the expected…
Robust optimization methods have shown practical advantages in a wide range of decision-making applications under uncertainty. Recently, their efficacy has been extended to multi-period settings. Current approaches model uncertainty either…
We study the problem of utility maximization from terminal wealth in which an agent optimally builds her portfolio by investing in a bond and a risky asset. The asset price dynamics follow a diffusion process with regime-switching…
Managing insurance and financial risk when data is limited is a key task in the insurance industry. In this paper, we focus on cases where the risk distribution is modeled as a mixture with some components estimable to high precision or…
We study a continuous-time portfolio choice problem for an investor whose state-dependent preferences are determined by an exogenous factor that evolves as an It\^o diffusion process. Since risk attitudes at the end of the investment…
We quantify model risk of a financial portfolio whereby a multi-period mean-standard-deviation criterion is used as a selection criterion. In this work, model risk is defined as the loss due to uncertainty of the underlying distribution of…
The optimization of large portfolios displays an inherent instability to estimation error. This poses a fundamental problem, because solutions that are not stable under sample fluctuations may look optimal for a given sample, but are, in…
We extend Robust Optimization to fractional programming, where both the objective and the constraints contain uncertain parameters. Earlier work did not consider uncertainty in both the objective and the constraints, or did not use Robust…
We introduce a dynamic optimization framework to analyze optimal portfolio allocations within an information driven contagious distress model. The investor allocates his wealth across several stocks whose growth rates and distress…
This paper demonstrates a practical method for computing the solution of an expectation-constrained robust maximization problem with immediate applications to model-free no-arbitrage bounds and super-replication values for many financial…
This paper investigates the robustness of stochastic optimal control for controlled regime switching diffusions. We consider systems driven by both continuous fluctuations and discrete regime changes, allowing for model misspecification in…
We extend the classical mean-variance (MV) framework and propose a robust and sparse portfolio selection model incorporating an ellipsoidal uncertainty set to reduce the impact of estimation errors and fixed transaction costs to penalize…
We study an open problem of risk-sensitive portfolio allocation in a regime-switching credit market with default contagion. The state space of the Markovian regime-switching process is assumed to be a countably infinite set. To characterize…
We propose a distributionally robust formulation of the traditional risk parity portfolio optimization problem. Distributional robustness is introduced by targeting the discrete probabilities attached to each observation used during…
Among professionals and academics alike, it is well known that active portfolio management is unable to provide additional risk-adjusted returns relative to their benchmarks. For this reason, passive wealth management has emerged in recent…
In this paper, we study a stochastic recursive optimal control problem in which the cost functional is described by the solution of a backward stochastic differential equation driven by G-Brownian motion. Under standard assumptions, we…