Related papers: Optimal investment and consumption with downside r…
This paper studies indefinite stochastic linear-quadratic (LQ) optimal control for jump-diffusion systems with random coefficients. We construct an algebraic inverse flow from the zero-control base system, extract the semimartingale kernel…
We study optimal investment in an asset subject to risk of default for investors that rely on different levels of information. The price dynamics can include noises both from a Wiener process and a Poisson random measure with infinite…
We revisit the problem of portfolio selection, where an investor maximizes utility subject to a risk constraint. Our framework is very general and accommodates a wide range of utility and risk functionals, including non-concave utilities…
This paper studies an optimal consumption problem for a loss-averse agent with reference to past consumption maximum. To account for loss aversion on relative consumption, an S-shaped utility is adopted that measures the difference between…
This paper introduces a novel methodology for the pricing and management of share buyback contracts, overcoming the limitations of traditional optimal control methods, which frequently encounter difficulties with high-dimensional state…
The finite state semi-Markov process is a generalization over the Markov chain in which the sojourn time distribution is any general distribution. In this article we provide a sufficient stochastic maximum principle for the optimal control…
We consider a risk-sensitive optimization of consumption-utility on infinite time horizon where the one-period investment gain depends on an underlying economic state whose evolution over time is assumed to be described by a discrete-time,…
We study a portfolio selection problem in a continuous-time It\^o-Markov additive market with prices of financial assets described by Markov additive processes which combine L\'evy processes and regime switching models. Thus the model takes…
We study an optimal extraction problem where the agent's actions in the spot market exert an additive proportional negative impact on the commodity price. The commodity price dynamics, prior to any activity by the agent, are evolved by a…
We determine the optimal investment strategy of an individual who targets a given rate of consumption and who seeks to minimize the probability of going bankrupt before she dies, also known as {\it lifetime ruin}. We impose two types of…
This paper studies a life-cycle optimal portfolio-consumption problem when the consumption performance is measured by a shortfall aversion preference with an additional drawdown constraint on consumption rate. Meanwhile, the agent also…
Hedge Funds are considered as one of the portfolio management sectors which shows a fastest growing for the past decade. An optimal Hedge Fund management requires an appropriate risk metrics. The classic CAPM theory and its Ratio Sharpe…
The value function of an optimal stopping problem for jump diffusions is known to be a generalized solution of a variational inequality. Assuming that the diffusion component of the process is nondegenerate and a mild assumption on the…
This paper considers an insurer with two collaborating business lines that faces three critical decisions: (1) dividend payout, (2) reinsurance coverage, and (3) capital injection between the lines, in the presence of model uncertainty. The…
This paper studies robust forward investment and consumption preferences and optimal strategies for a risk-averse and ambiguity-averse agent in an incomplete financial market with drift and volatility uncertainties. We focus on non-zero…
Even in the face of deteriorating and highly volatile demand, firms often invest in, rather than discard, aging technologies. In order to study this phenomenon, we model the firm's profit stream as a Brownian motion with negative drift. At…
I characterize optimal government policy in a sticky-price economy with different types of consumers and endogenous financial constraints in the banking and entrepreneurial sectors. The competitive equilibrium allocation is constrained…
We study optimal risk sharing among $n$ agents endowed with distortion risk measures. Our model includes market frictions that can either represent linear transaction costs or risk premia charged by a clearing house for the agents. Risk…
Aiming to analyze the impact of environmental transition on the value of assets and on asset stranding, we study optimal stopping and divestment timing decisions for an economic agent whose future revenues depend on the realization of a…
This paper studies a life-time consumption-investment problem under the Black-Scholes framework, where the consumption rate is subject to a lower bound constraint that linearly depends on her wealth. It is a stochastic control problem with…