Related papers: Optimal investment and consumption with downside r…
We consider a classical stochastic control problem in which a diffusion process is controlled by a withdrawal process up to a termination time. The objective is to maximize the expected discounted value of the withdrawals until the…
In this article we extend earlier work on the jump-diffusion risk-sensitive asset management problem [SIAM J. Fin. Math. (2011) 22-54] by allowing jumps in both the factor process and the asset prices, as well as stochastic volatility and…
This article examines arbitrage investment in a mispriced asset when the mispricing follows the Ornstein-Uhlenbeck process and a credit-constrained investor maximizes a generalization of the Kelly criterion. The optimal differentiable and…
In this paper we investigate a utility maximization problem with drift uncertainty in a multivariate continuous-time Black-Scholes type financial market which may be incomplete. We impose a constraint on the admissible strategies that…
In this paper, we extend the jump-diffusion model proposed by Davis and Lleo to include jumps in asset prices as well as valuation factors. The criterion, following earlier work by Bielecki, Pliska, Nagai and others, is risk-sensitive…
We derive the optimal investment decision in a project where both demand and investment costs are stochastic processes, eventually subject to shocks. We extend the approach used in Dixit and Pindyck (1994), chapter 6.5, to deal with two…
This paper studies an optimal investment and risk control problem for an insurer with default contagion and regime-switching. The insurer in our model allocates his/her wealth across multi-name defaultable stocks and a riskless bond under…
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…
We determine the optimal investment strategy in a Black-Scholes financial market to minimize the so-called {\it probability of drawdown}, namely, the probability that the value of an investment portfolio reaches some fixed proportion of its…
We study option prices in financial markets where the risky asset prices are modelled by jump diffusions. It was proposed by Schweizer (1996) in a general semimartingale setting, following earlier works by F\"ollmer and Sondermann (1986)…
This paper solves the consumption-investment problem under Epstein-Zin preferences on a random horizon. In an incomplete market, we take the random horizon to be a stopping time adapted to the market filtration, generated by all observable,…
In this paper we consider non convex control problems of stochastic differential equations driven by relaxed controls. We present existence of optimal controls and then develop necessary conditions of optimality. We cover both continuous…
We consider insurance derivatives depending on an external physical risk process, for example a temperature in a low dimensional climate model. We assume that this process is correlated with a tradable financial asset. We derive optimal…
Forecasting accuracy is routinely optimised in financial prediction tasks even though investment and risk-management decisions are executed under transaction costs, market impact, capacity limits, and binding risk constraints. This paper…
This paper studies the optimal consumption under the addictive habit formation preference in markets with transaction costs and unbounded random endowments. To model the proportional transaction costs, we adopt the Kabanov's multi-asset…
This paper studies an optimal investing problem for a retiree facing longevity risk and living standard risk. We formulate the investing problem as a portfolio choice problem under a time-varying risk capacity constraint. We derive the…
Obtaining utility maximizing optimal portfolios in closed form is a challenging issue when the return vector follows a more general distribution than the normal one. In this note, we give closed form expressions, in markets based on…
Most decision theories, including expected utility theory, rank dependent utility theory and cumulative prospect theory, assume that investors are only interested in the distribution of returns and not in the states of the economy in which…
We consider the robust exponential utility maximization problem in discrete time: An investor maximizes the worst case expected exponential utility with respect to a family of nondominated probabilistic models of her endowment by…
This paper solves a utility maximization problem under utility-based shortfall risk constraint, by proposing an approach using Lagrange multiplier and convex duality. Under mild conditions on the asymptotic elasticity of the utility…